UNIVERSITY  OF  CALIFORNIA 
AT    LOS  ANGELES 


THE  GIFT  OF 

MAY  TREAT  MORRISON 

IN  MEMORY  OF 

ALEXANDER  F  MORRISON 


THE    FABIAN   SOCIALIST   SERIES,  No.  5 


THE   COMMONSENSE   OF 
MUNICIPAL   TRADING 


THE   FABIAN    SOCIETY 

FOUNDKD     I8S3 

THE  FABIAN  SOCIETY  consists  of  men  and  women  who 
are  Socialists,  that  is  to  say,  in  the  words  of  its  "Basis,"  of 
those  who  aim  at  the  reorganisation  of  society  by  the  emancipa- 
tion of  Land  and  Industrial  Capital  from  individual  and  class 
ownership,  and  the  vesting  of  them  in  the  community  for  the 
general  benefit.  .  .  .  For  the  attainment  of  these  ends  the 
Fabian  Society  looks  to  the  spread  of  Socialist  opinions,  and  the 
social  and  political  changes  consequent  thereon.  It  seeks  to 
promote  these  by  the  general  dissemination  of  knowledge  as  to 
the  relation  between  the  individual  and  society  in  its  economic, 
ethical,  and  political  aspects. 

The  Society  welcomes  as  members  any  persons,  men  or 
women,  who  desire  to  promote  the  growth  of  Socialist  opinion 
and  to  hasten  the  enactment  of  Socialist  measures,  and  it  exacts 
from  its  members  no  pledge  except  a  declaration  that  they  are 
Socialists. 

The  Society  is  largely  occupied  in  the  endeavour  to  discover 
in  what  way  the  principles  of  Socialism  can  be  applied  both  to 
the  political  problems  which  from  time   to  time  come  up  for 
settlement,  and  to  those  problems  of  the  future  which  are  as  yet 
rather  political  theory  than  actual  politics.      It  holds  fortnightly 
meetings  for  the  discussion  of  papers  on  such  subjects  by  members 
and  others,  some  of  which  are  published  as  Fabian  Tracts. 
The  Society  includes  : — 
I.  Members,  who  must  sign  the  Basis  and  be  elected  by  the  Com- 
mittee.    Their  subscription  is  not  fixed  ;  each  is  expected  to 
pay  according  to  his  means.     They  control  the  Society  through 
their  Executive  Committee  and  at  business  meetings. 
II.   Associates,  who  sign  a  form  expressing  general  sympathy  with 
the  objects  of  the  Society,  and  pay  not  less  than  los.  a  year. 
They  can  attend  all  except  specially  private  meetings,  but  have 
no  control  over  the  Society  and  its  policy. 
III.  Subscribers,  who  must  pay  at  least  5s.  a  year,  and  can  attend 
the  lectures. 

The  monthly  paper,  Fabian  News,  and  the  Fabian  Tracts  are 
sent  as  published  to  all  three  classes. 

Lists  of  Publications,  Annual   Report,  Form  of  Application 
as    Member   or   Associate,    and    any   other   information   can   be 
obtained  on  application,  personally,  or  by  letter,  of 
The  Secretary  of  the  Fabian  Society, 

3   Clement's  Inn,   Strand, 

London,  W.C. 


THE  COMMONSENSE  OF 
MUNICIPAL  TRADING 


BY 

BERNARD    SHAW 
WITH    NEW    8-PAGE    PREFACE 


NEW  YORK 

JOHN  LANE  COMPANY 

MCMXI 


1.  The    Commercial     Successes    of 

Municipal  Trading         .          .  i 

2.  Municipal  Management      .          .  9 

3.  When    Municipal    Trading   does 

not  pay         .  .  .  .12 

4.  The    Anti  -  Social     Reactions    of 

Commercial  Enterprise  .          .  17 

5.  The  Beneficial  Reactions  of  Com- 

mercial Enterprise           .          .  34 

6.  Commercial  and  Municipal  Prices  43 

7.  Difficulties    of   Municipal   Trad- 

ing— -Electrical  Enterprise       .  ^^ 

8.  Difficulties   of  Municipal    Trad- 

ing— Housing       ...  66 

9.  The  Municipal  Audit          .          .  79 

10.  The  Municipal  Revenue     .          .  89 

11.  Our  Municipal  Councillors           .  103 

1 2.  Conclusion         .  .  .  .115 


HB 
443/ 
S53<L 
nil 


PREFACE    TO 
THE    FABIAN    EDITION 

In  handing  over  this  edition  to  the  Fabian  Society 
to  be  distributed  at  a  price  which  will  make  it 
easy  for  those  most  concerned  to  buy  a  copy,  I 
do  not  find  it  necessary  to  add  any  new  matter 
or  withdraw  any  old.  The  ordinary  electioneering 
opponents  of  municipal  trading  have  for  the 
most  part  left  my  book  alone,  having  neither  the 
economic  knowledge,  the  practical  experience  of 
municipal  work,  nor  the  literary  skill  to  cope 
with  me.  But  they  still  persuade  the  public  that 
trading  municipalities  are  staggering  towards 
bankruptcy  under  a  burden  of  ever-increasing 
debt.  The  trick  is  simple  :  instead  of  calling  the 
funds  of  the  municipality  its  capital,  you  call  it 
"  municipal  debt,"  and  go  on  to  contend  that  the 
success  of  the  municipalities  in  serving  the  public 
at  cost  price  and  eliminating  idle  shareholders, 
means  that  they  are  less  capable  and  businesslike 

V 

431715 


vi  Municipal  Trading 

than  the  commercial  concerns  which  measure  their 
soundness  by  the  excess  of  their  charges  over 
their  expenses,  and  by  the  resultant  magnitude  of 
their  dividends. 

But  the  opponents  of  municipal  trading  could 
not,  when  this  book  was  first  published,  get  over 
the  unanswerable  fact  that  in  spite  of  all  their 
denunciations  of  our  municipalities  as  bankrupt 
and  mismanaged  concerns  —  denunciations  which 
would  have  ruined  even  the  soundest  private 
businesses,  but  against  which  private  businesses 
have  a  remedy  (witness  the  enormous  damages 
obtained  by  "  the  Soap  Trust "  against  a  popular 
newspaper  which  can  slander  municipal  trading 
with  complete  impunity) — municipal  credit,  as 
shewn  by  the  prices  of  its  stock,  remained 
unshaken  ;  and  the  very  people  who  were  declar- 
ing it  to  be  worthless  were  glad  to  invest  their 
own  money  in  municipal  stock  at  gilt-edged 
prices.  They  now,  however,  point  out  triumph- 
antly that  the  price  of  municipal  stock  has  fallen, 
and  that  the  London  County  Council  can  no 
longer  get  as  much  money  as  it  wants  at  3  per 
cent.  In  reply,  I  can  only  say  that  a  con- 
troversialist who  is  desperate  enough  to  claim 
that  this  is  the  result  of  a  loss  of  confidence  in 
municipal  security  is  desperate  enough  for  any- 
thing. The  credit  of  our  municipalities  is  as 
high  as  ever  it  was.  What  has  really  happened 
is   that  the  value  of  money  has  risen  since   the 


Preface  to  Fabian  Edition       vii 

South  African  War.  Consols  have  flillen  from  above 
par  to  nearly  eighty.  The  bank  rate  has  touched 
seven.  The  Anti-Municipalizers  forget  that  if  they 
wish  to  claim  a  fall  in  the  price  of  municipal  stock 
as  evidence  that  their  campaign  against  English 
civic  activity  is  producing  some  effect,  they  must 
point,  not  to  a  general  fall  in  prices  which  has  hit 
private  enterprises  much  harder  than  public  enter- 
prises, but  to  a  fall  confined  to  municipal  stocks 
and  unaccompanied  by  a  rise  in  the  price  of 
money.  It  is  no  use  triumphing  over  the  diffi- 
culties of  the  Borough  Treasurer  when  the  Chan- 
cellor of  the  Exchequer  and  the  Rothschilds  are 
in  the  same  straits.  The  argument  would  not  be 
worth  mentioning  but  that  it  illustrates  the  amaz- 
ing ineptitude  and  ignorance  with  which  the 
question  is  discussed  in  the  daily  press. 

Perhaps  the  stupidest  cry  that  has  been  raised 
in  the  Anti-Municipal  agitation — which  is  really 
an  agitation  to  reserve  all  public  services  for  the 
profit  of  private  individuals — is  the  cry  for  "  a 
commercial  audit."  I  venture  to  believe  that  no 
honorable  and  sensible  man  who  will  take  the 
trouble  to  read  these  pages  will  ever  again  dis- 
grace himself  by  echoing  that  cry,  or  by  casting  a 
vote  for  any  person  capable  of  such  an  elementary 
blunder.  Those  who  did  so  at  the  last  municipal 
elections  are  now  sufficiently  ashamed  of  them- 
selves ;  and  we  hear  nothing  more  of  the  gentle- 
men who  think  a  reduction  of  the  death  rate  a 


viii  Municipal  Trading 

commercial  mistake  because  it  does  not  shew  a 
profit  of  lo  per  cent  in  cash,  as  it  would  have 
to  do  before  a  contractor  would  undertake  it. 
But  we  must  face  the  fact  that  honorable,  sensible, 
and  ordinarily  intelligent  people,  from  thought- 
lessness, ignorance,  and  the  tyranny  of  commercial 
habit,  do  make  these  blunders,  and,  as  voters, 
become  the  tools  of  the  moneyed  interests  which 
see  in  every  extension  of  municipal  activity  the 
closing  to  them  of  some  field  which  has  been  to 
them  a  veritable  Tom  Tiddler's  ground  on  which 
they  have  been  picking  up  gold  and  silver  at  the 
expense  of  the  ratepayers  for  years  past. 

It  is  generally  assumed  that  the  result  of  the 
municipal  elections  of  1907  was  a  severe  set-back 
for  municipal  trading.  The  causes  of  that  set- 
back, in  so  far  as  they  had  produced  a  genuine 
revolt  of  the  ratepayer  against  municipal  activity, 
are  explained  in  this  book.  Before  the  revolt 
occurred  I  pointed  out  that  our  system  of  rating, 
and  the  success  with  which  the  cost  of  our  social 
ameliorations  was  being  evaded  by  the  property 
owners  and  by  the  working  classes,  and  thrown 
on  the  struggling  mass  of  middle-class  ratepayers, 
was  producing  intolerable  injustice.  The  remedy 
proposed — that  of  putting  back  the  clock — was 
impracticable.  I  knew,  and  everybody  who  had 
ever  served  on  a  public  body  knew,  that  the  first 
hour  spent  on  a  committee  would  knock  out  of 
the    new   representatives    most    of   the    nonsense 


Preface  to  Fabian  Edition        ix 

they  had  been  talking  at  their  election  meetings, 
and  that  the  most  intelligent  and  disinterested  of 
them  would  presently  become  ardent  municipal- 
izers.  But  it  is  still  true  that  until  municipal 
finance  is  radically  reformed,  and  constitutional 
machinery  provided  for  public  enterprises  extend- 
ing over  much  larger  areas  than  those  marked  out 
by  our  present  obsolete  and  obstructive  municipal 
boundaries,  we  shall  continue  to  have  ratepayers' 
revolts,  and  crippled  public  enterprise. 

In  London  the  issue  was  so  confused  with  the 
usual  political  party  considerations  that  hardly  any 
one  noticed  that  the  clean  sweep  which  was  sup- 
posed to  have  been  made  of  Municipal  Socialists 
was  really  a  clean  sweep  of  those  Liberals  who  had 
been  the  most  determined  opponents  of  the  Muni- 
cipal Socialists  in  the  previous  Council.  It  was 
these  Anti-Socialists  who  were  swept  away,  whilst 
the  professed  Fabian  Socialists  held  their  seats  in 
the  midst  of  the  debacle.  I  mention  this  for 
the  sake  of  its  lesson,  which  is,  that  the 
ratepayers  must  not  put  their  trust  in  election- 
eering literature  which  proceeds  on  the  wildly 
erroneous  assumption  that  every  Liberal  is  a 
Socialist  and  every  Conservative  an  opponent  of 
State  or  Municipal  activity.  There  is  no  salvation 
for  the  voter  except  in  understanding  exactly  what 
the  municipalities  are  doing  ;  and  this  book  is 
intended  to  put  him  in  that  position  as  far  as  a 
book  can  supply  the  need  of  that  actual  first-hand 


X  Municipal  Trading 

experience  of  the  working  of  municipalities  which 
only  very  few  of  us  can  obtain,  and  without 
which  I  certainly  should  not  have  been  able, 
merely  as  a  man  of  letters,  to  make  my  book  of 
any  value. 

In  conclusion,  I  again  warn  the  ratepayer  who 
is  gasping  for  breath  under  the  pressure  of  the 
propertied  class  squeezing  rents  from  him  from 
above,  and  the  working  class  squeezing  education, 
housing,  medical  attendance,  poor  relief,  and 
old  age  pensions  from  him  from  below,  that 
his  condition  will  become  more  and  more  pre- 
carious, no  matter  whether  he  votes  Moderate 
or  Progressive,  until  he  takes  his  public  business 
as  seriously  and  unromantically  as  his  private 
business,  and  resorts  to  the  simple  and  obvious 
means  of  relieving  and  protecting  himself  that 
may  be  gathered  from  these  pages. 

Two  new  developments  of  the  opposition  to 
civic  enterprise  have  occurred  lately.  One  is  the 
practice  of  circulating  to  the  ratepayers  statements 
implying  that  municipal  trading  and  taxation  of 
unearned  incomes  involve  irreligion  and  licentious- 
ness. This  I  need  not  deal  with  :  it  is  only  too 
obvious  that  the  irreligion  and  licentiousness  in 
which  we  are  already  steeped  are  the  result  of 
abandoning  our  people  to  the  unscrupulous  rapacity 
of  commercial  enterprise,  which  makes  huge  profits 
out  of  the  evils  our  municipalities  strive  constantly 
to  suppress.     No  municipality  has    yet  taken  or 


Preface  to  Fabian  Edition        xi 

proposed  to  take  a  single  step  against  religion  or 
morals,  whereas  private  enterprise  openly  and 
shamelessly  exploits  poverty,  vice,  and  irreligion 
for  its  own  profit  to  the  despair  of  the  ratepayer, 
who  has  to  pay  for  dealing  with  all  the  disease, 
the  crime,  and  the  depravation  of  character  that 
enriches  the  sweater,  the  distiller,  and  the  brothel- 
keeper. 

The  other  development  is  the  offer  of  Tariff 
Reform  as  a  means  of  relieving  the  ratepayer 
without  recourse  to  Municipal  Socialism.  On 
this  I  have  only  to  say  that  if  Tariff  Reform 
succeeds  in  suppressing  manufactured  imports  and 
substituting  home  production  (its  original  object), 
it  will  not  be  a  source  of  revenue  at  all.  If, 
however,  importation  continues,  and  a  revenue  is 
derived  from  taxing  imports,  the  ratepayer  has  no 
security  that  this  revenue  will  be  applied  to  his 
relief  by  increasing  our  present  Grants  in  Aid  by 
the  central  government  to  the  local  authority 
rather  than  to  reducing  the  income-tax  on  un- 
earned incomes,  in  which  case,  he  would  be  paying 
more  for  imported  goods  only  to  see  the  excess 
pocketed  by  the  very  people  who  already  exact 
so  large  a  share  of  his  earnings  as  rent.  So,  as 
municipal  trading  is  not  an  evil  to  be  staved  off 
by  any  possible  means,  but  a  highly  desirable  and 
beneficial  extension  of  civilization,  equally  good 
for  Free  Trade  and  Protectionist  countries,  there 
is  no  reason  whatever  why  the  most  ardent  Tariff 


xii  Municipal  Trading 

Reformer  should  not  also  be  an  ardent  Municipal 
Socialist. 

Perhaps  the  most  impudent  of  the  recent 
complaints  of  municipal  trading  is  that  it  drives 
capital  out  of  the  country.  It  is  almost  the 
only  sure  means  of  keeping  it  at  home.  The 
present  system,  which  sends  English  capital  to 
develop  Bahia  Blanca  whilst  leaving  Birmingham 
to  wallow  in  its  own  death-rate,  is  driving  capital 
abroad  as  fast  as  it  will  go.  Municipal  trading, 
if  it  had  nothing  more  to  recommend  it  than  its 
effect  in  making  home  investment  compulsory, 
would  be  justified  by  that  alone  from  the  patriotic 
point  of  view. 

G.  B.  S. 

AyoT  St.  Lawrence, 
l^th  January,  1908. 


I 

THE  COMMERCIAL  SUCCESSES  OF 
MUNICIPAL  TRAOING . 

Municipal  Trading  seems,  a  very  , si  in  pie  anatter- 
of  business.  Yet  it  is  conceivable  by  a  sensible  man 
that  the  political  struggle  over  it  may  come  nearer 
to  a  civil  war  than  any  issue  raised  in  England 
since  the  Reform  Bill  of  1832.  It  will  certainly 
not  be  decided  by  argument  alone.  Private  pro- 
perty will  not  yield  its  most  fertile  provinces 
to  the  logic  of  Socialism  ;  nor  will  the  sweated 
laborer  or  the  rackrented  and  rackrated  city  shop- 
keeper or  professional  man  refrain,  on  abstract 
Individualist  grounds,  from  an  obvious  way  of 
lightening  his  burden.  The  situation  is  as  yet  so 
little  developed  that  until  the  other  day  few  quarter 
columns  in  the  newspaper  attracted  less  attention 
than  the  occasional  one  headed  Municipal  Trading; 
but  the  heading  has  lately  changed  in  the  Times  to 
Municipal  Socialism  ;  and  this,  in  fact,  is  what  is 

B 


2  Municipal  Trading 

really  on  foot  among  us  under  the  name  of  Pro- 
gressivism. 

At  first  sight  the  case  in  favor  of  Municipal 
Trading  seems  overwhelming.  Take  the  case  of  a 
shopkeeper  consuming  a  great  deal  of  gas  or  elec- 
tric light  for  the  attractive  display  of  his  wares,  or 
a  factory  owner  with  hundreds  of  work  benches  to 
illuminate.  For  all  this  light  he  has  to  pay  the  cost 
of  production  plus  interest  on  capital  at  the  rate 
necessary  to  induce  private  investors  to  form  ordin- 
ary commercial  gas  or  electric  light  companies,  which 
are  managed-V7:t-h  the  object  of  keeping  the  rate  of 
interest,  up  instead  o^  down  :  all  improvement  in 
the  service  "and  reductions  in  price  (if  any)  being 
introduced  with  the  sole  aim  of  making  the  excess 
of  revenue  over  cost  as  large  as  possible. 

Now  the  shopkeeper  in  his  corporate  capacity 
as  citizen-constituent  of  the  local  governing  body 
can  raise  as  much  capital  as  he  likes  at  less  than 
four  per  cent.  It  is  much  easier  to  stagger  consols 
than  to  discredit  municipal  stock.  Take  the  case 
of  the  London  County  Council.  For  ten  years  past 
the  whole  weight  of  the  Government  and  the  news- 
papers which  support  it  has  been  thrown  against 
the  credit  of  the  Council.  A  late  prime  minister 
denounced  it  in  such  terms  that,  to  save  his  face, 
his  party  was  forced  to  turn  all  the  vestries  into 
rival  councils  on  the  "  divide  and  govern  "  prin- 
ciple. The  name  of  the  London  County  Council 
has  been  made  a  hissing  among  all  who  take  their 


Commercial  Successes  3 

politics  from  the  Court  and  the  Conservative 
papers.  To  such  a  torrent  of  denunciation  a  private 
company  would  have  succumbed  helplessly  :  the 
results  of  an  attempt  to  issue  fresh  stock  would 
not  have  paid  the  printer's  bill.  But  the  County 
Council  has  only  to  hold  up  its  finger  to  have 
millions  heaped  on  it  at  less  than  four  per  cent.  It 
has  to  make  special  arrangements  to  allow  small 
investors  a  chance.  The  very  people  who  have 
been  denouncing  its  capital  as  "municipal  indebted- 
ness "  struggle  for  the  stock  without  the  slightest 
regard  to  their  paper  demonstrations  of  the  ap- 
proaching collapse  of  all  our  municipal  corpora- 
tions under  a  mountain  of  debt,  and  of  the 
inevitable  bankruptcy  of  New  Zealand  and  the 
Australasian  colonies  generally  through  industrial 
democracy.  The  investor  prefers  the  corporation 
with  the  largest  municipal  debt  exactly  as  he 
prefers  the  insurance  company  with  the  largest 
capital.  And  he  is  quite  right.  Municipal  expendi- 
ture in  trading  is  productive  expenditure :  its  debts 
are  only  the  capital  with  which  it  operates.  And 
that  is  why  it  never  has  any  difficulty  in  raising 
that  capital.  Sultans  and  South  American  Repub- 
lics may  beg  round  the  world  in  vain  ;  chancellors 
may  have  to  issue  national  stock  at  a  discount ; 
but  a  Borough  Treasurer  simply  names  a  figure 
and  gets  it  at  par. 

This  is  the  central  commercial  fact  of  the  whole 
question.  The  shopkeeper,  by  municipal  trading,  can 


4  Municipal  Trading 

get  his  light  for  the  current  cost  of  production  plus 
a  rate  of  interest  which  includes  no  insurance  against 
risk  of  loss,  because  the  security,  in  spite  of  all 
theoretical  demonstrations  to  the  contrary,  is  treated 
by  the  investing  pubHc  and  by  the  law  of  trustee- 
ship as  practically  perfect.  Any  profit  that  may  arise 
through  accidental  overcharge  returns  to  the  rate- 
payer in  relief  of  rates  or  in  public  service  of  some 
kind. 

The  moment  this  economic  situation  is  grasped, 
the  successes  of  municipal  trading  become  intellig- 
ible ;  and  the  entreaties  of  commercial  joint  stock 
organization  to  be  protected  against  the  competition 
of  municipal  joint  stock  organization  become  as 
negligible  as  the  plea  of  the  small  shopkeeper  to  be 
protected  against  the  competition  of  the  Civil  Service 
or  Army  and  Navy  Stores.  Shew  the  most  bitterly 
Moderate  ratepayer  a  municipal  lighting  bill  at  six- 
pence a  thousand  feet  or  a  penny  a  unit  cheaper  than 
the  private  company  charges  him,  and  he  is  a  con- 
verted man  as  far  as  gas  or  electric  light  is  concerned. 
And  until  commercial  companies  can  raise  capital  at 
lower  rates  than  the  City  Accountant  or  the  Borough 
Treasurer,  and  can  find  shareholders  either  offering 
their  dividends  to  relieve  the  rates  or  jealously  de- 
termining to  reduce  the  price  of  light  to  a  minimum 
lest  they  should  be  paying  a  share  of  their  neigh- 
bors' rates  in  their  lighting  bills,  it  will  always  be 
possible  for  a  municipality  of  average  capacity  to 
underbid  a  commercial  company. 


Commercial  Successes  5 

Here,  then,  is  the  explanation  of  the  popularity 
and  antiquity  of  municipal  trading.  As  far  as  their 
legal  powers  have  gone,  municipalities  have  always 
traded,  and  will  always  trade,  to  the  utmost  limits 
of  the  business  capacity  and  public  spirit  of  their 
members. 

No  doubt  a  body  of  timid  and  incapable  coun- 
cillors will  leave  as  many  public  services  as  possible 
to  commercial  enterprise,  just  as,  in  their  private 
concerns,  they  keep  small  shops  in  a  small  way  in- 
stead of  becoming  Whiteleys  and  Wannamakers, 
Morgans  and  Carnegies.  And  a  body  of  rich  and 
commercially  able  councillors  may  pursue  exactly 
the  same  policy  because  they  hold  shares  in  the 
commercial  enterprises  which  municipal  enterprise 
would  supplant,  and  have  in  fact  deliberately  taken 
the  trouble  to  get  elected  for  the  purpose  of  pro- 
tecting their  private  enterprises  against  the  "  unfair  " 
(meaning  the  irresistible)  competition  of  the  muni- 
cipality. Further,  a  body  of  amateur  doctrinaires 
who  rush  into  municipal  trading  on  principle  with- 
out enough  business  training  and  experience  either 
to  manage  the  business  themselves  or  allow  their 
staff  to  do  it  for  them,  will  make  a  mess  of  it  at 
first,  precisely  as  that  much  commoner  object  the 
amateur  joint  stock  company  makes  a  mess  of  it. 
There  is  no  magic  in  the  ordeal  of  popular  election 
to  change  narrow  minds  into  wide  ones,  cowards 
into  commanders,  private  ambition  into  civic  patri- 
otism, or  crankiness  into  common  sense.  But  still 


6  Municipal  Trading 

less  is  there  any  tendency  to  reverse  the  operation ; 
for  the  narrowest  fool,  the  vulgarest  adventurer,  the 
most  impossible  fanatic,  gets  socially  educated  by 
public  life  and  committee  work  to  a  degree  never 
reached  in  private  life,  or  even  in  private  commerce. 
The  moment  public  spirit  and  business  capacity 
meet  on  a  municipality  you  get  an  irresistible  de- 
velopment of  municipal  activity.  Operations  in  land 
like  those  effected  by  the  Corporation  of  Birming- 
ham in  Mr.  Chamberlain's  time,  and  by  the  London 
County  Council  in  our  own,  are  taken  in  hand  ; 
and  the  town  supplies  of  water,  of  light,  of  tram- 
ways, and  even  of  dwellings,  are  conquered  from 
competitive  commerce  by  civic  co-operation.  And 
there  is  no  arguing  with  the  practical  results.  You 
take  a  man  who  has  just  paid  a  halfpenny  for  a  ride 
in  a  municipal  tramcar  which  under  commercial 
management  would  have  cost  him  a  penny  or  two- 
pence ;  and  you  undertake  to  go  into  the  corpora- 
tion accounts  with  him  and  prove  that  under  a 
"fair"  system  of  book-keeping  he  should  have  paid 
fourpence.  You  explain  to  the  working  man  voter 
how  true  economy  demands  that  his  relative  who 
is  employed  as  a  driver  and  conductor  in  the  muni- 
cipal service  for  ten  hours  a  day,  and  six  days  a 
week,  with  standard  wages  and  a  uniform,  should 
go  back  to  competition  wages,  seventeen  hours, 
seven  days,  and  his  own  seedy  overcoat  and  muffler. 
You  buttonhole  the  shopkeeper  who  has  just  paid 
two  and  threepence  per  thousand  cubic  feet  for  his 


Commercial  Successes  7 

gas,  with  the  public  lighting  rate  and  a  bonus  thrown 
in  ;  and  you  assure  him  that  unless  he  votes  for  a 
return  to  the  supremacy  of  the  commercial  company 
at  three  shilhngs  per  thousand  and  a  reimposition 
of  the  Lighting  Rate,  the  city  will  be  bankrupt  and 
the  Mayor  replaced  by  a  Man  in  Possession,  You 
unfold  a  Union  Jack  in  London,  and  tell  the  care- 
worn cockney,  who  pays  for  his  water  to  a  private 
company  more  than  double  what  his  neighbor 
across  the  border  pays  to  the  Croydon  Corporation, 
that  the  Empire  stands  or  falls  with  the  practice  of 
buying  water  at  a  price  which  varies  inversely  with 
the  quantity  consumed,  with  the  right  of  a  water 
shareholder  to  a  vote  in  every  constituency  through 
which  one  of  his  pipes  runs,  and  with  the  main- 
tenance, free  of  Probate  Duty,  of  a  monopoly  granted 
by  James  I.,  and  by  this  time  appreciated  by  looo 
per  cent  in  value.  It  is  all  pathetically  useless.  The 
municipal  trader  does  not  contradict  you  :  he  laughs 
at  you.  So  long  as  the  municipal  market  is  the 
cheapest  market,  the  public  will  buy  in  it  ;  and  the 
protests  of  the  companies  are  as  futile  as  the  protest 
of  the  stationer  and  the  apothecary  against  the 
stores. 

It  is  not  necessary  to  overload  these  pages  by 
quoting,  from  the  Municipal  Year  Book,  examples 
of  successful  municipal  trading  in  verification  of  the 
above.  Progressive  electioneering  literature  teems 
with  such  examples.  The  tracts  of  the  Fabian 
Society  and   of  the   London  Reform  Union,  the 


8  Municipal  Trading 

columns  of  the  Progressive  papers,  the  protests 
against  "  municipal  indebtedness  "  in  the  Anti-Pro- 
gressive papers,  the  annual  reports  of  the  local 
authorities,  the  weekly  papers  devoted  to  municipal 
matters  with  their  endless  photographs  and  figures, 
the  handbooks  of  municipal  socialism  compiled  by 
such  papers  as  the  Clarion  from  its  own  columns, 
and  the  County  Council  returns  and  parliamentary 
reports  on  municipal  trading,  have  so  surfeited  the 
public  with  the  facts  that  a  recapitulation  here  would 
be  beyond  human  endurance.  It  is  waste  of  time  to 
force  an  open  door  ;  and  in  all  public  services  in 
which  the  determining  commercial  factor  is  practi- 
cally unlimited  command  of  cheap  capital  combined 
with  indifference  to  dividend,  the  door  is  more  than 
wide  open  :  it  has  been  carried  clean  off  its  hinges 
by  the  victorious  rush  of  municipal  socialism  under 
the  reassuring  name  of  Progressivism. 


II 

MUNICIPAL   MANAGEMENT 

The  importance  of  management  as  a  factor  in 
industrial  success  cannot  easily  be  exaggerated  ; 
but  management  is  nowadays  as  completely  dis- 
sociated from  ownership,  and  as  easy  to  buy  in  the 
market,  as  machinery.  Nobody  now  suggests  that 
a  railway  company  is  an  impossibility  because  rail- 
ways cannot  be  managed  by  a  mob  of  shareholders, 
even  when  they  act  through  committees  of  directors 
who  do  not  know  the  difference  between  a  piston 
rod  and  a  sun-and-planets  gear.  The  directors 
simply  prescribe  the  results  they  wish  to  obtain, 
and  engage  a  staff  of  skilled  administrators  and 
railway  engineers  to  tell  them  how  to  obtain  it. 
Thus  the  London  and  North -Western  Railway 
Company  manufactures  everything  it  wants,  from 
locomotives  to  wooden  legs,  without  the  interven- 
tion of  a  contractor.  A  mob  of  ratepayers  acting 
through  a  municipal  authority  is  in  precisely  the 

^  B  2 


lo  Municipal  Trading 

same  position.  The  ratepayers  are  just  as  stupid 
and  short-sighted  as  ordinary  joint  stock,  share- 
holders ;  and  the  worst  of  their  representatives  on 
the  municipahties  are  as  incapable  as  the  worst 
ordinary  guinea-pig  directors.  But  the  ratepayers 
and  councillors  light  their  towns  with  electricity  ; 
run  tramway  services  ;  build  dwellings  ;  dredge 
harbors  ;  erect  dust  destructors  and  crematoria  ; 
construct  roads  and  manage  cemeteries,  as  easily  as 
a  body  of  clergymen's  widows  can  lay  an  Atlantic 
cable  if  they  have  money  enough,  or  an  illiterate 
millionaire  start  a  newspaper.  The  labor  market 
now  includes  an  ability  market  in  which  a  manager 
worth  £  1 0,000  a  year  can  be  hired  as  certainly  as 
a  navvy. 

In  the  ability  market,  the  municipalities  have 
a  decisive  advantage  in  the  superior  attraction 
of  public  appointments  for  prudent  and  capable 
organizers  and  administrators.  A  municipality  can 
always  get  an  official  more  cheaply  than  a  company 
can.  A  municipality  never  becomes  bankrupt,  is 
never  superseded  by  a  n^w  discovery,  and  never 
dismisses  an  official  without  giving  his  case  pro- 
longed consideration  in  committee,  from  which  he 
has  practically  an  appeal  to  the  whole  body.  A  man 
who  behaves  himself  and  does  his  work  has  no- 
thing to  fear  in  public  employment :  his  income 
and  position  are  permanently  assured.  Besides,  he 
enjoys  his  salary  to  the  full :  he  has  no  appearances 
to  keep  up  beyond  the  ordinary  decencies  of  life  : 


Municipal  Management        1 1 

he  need  not  entertain ;  need  not  keep  equipages  or 
servants  for  purposes  of  ostentation  ;  may  travel 
third  class  if  he  likes,  live  in  the  most  unfashionable 
neighborhood,  belong  to  what  sect  he  pleases  or 
to  no  sect,  and  dispose  of  his  time  and  gratify  his 
tastes  out  of  office  hours  with  a  personal  independ- 
ence unknown  to  commercial  employees.  It  is  no 
exaggeration  to  say  that  these  considerations  make 
a  municipal  post  of  ^350  a  year  more  desirable 
than  some  commercial  posts  and  professional  prac- 
tices that  bring  in  ^1000  a  year  ;  and  this  is  why 
the  ratepayers,  in  spite  of  their  stinginess  in  the 
matter  of  salaries  on  the  professional  scale,  get  so 
much  better  served  than  they  deserve. 

All  that  can  be  said  on  the  other  side  is  that 
if  the  municipal  officer  has  no  fears,  he  has  also 
strictly  limited  hopes.  The  Town  Clerk  and  the 
Borough  Engineer,  the  County  Surveyor  and  the 
Medical  Officer  of  Health,  all  know  that  they  will 
never  get  ^15,000  a  year,  nor  even  ^5000,  in  the 
municipal  service.  The  dreams  of  vulgar  ambition, 
and  the  excitements  of  financial  speculation,  of  party 
politics,  and  of  fashionable  life,  are  not  for  them. 
But  these  very  disabilities  have  their  value  as  selec- 
tive conditions.  The  vulgarly  ambitious  commercial 
and  social  adventurer  is  very  far  from  representing 
a  desirable  type  of  municipal  officer  ;  and  ambitions 
that  are  not  vulgar  have  full  scope  in  municipal  life, 
where  a  departmental  chief  can  attain  a  position  of 
enviable  consideration  and  real  public  usefulness. 


12  Municipal  Trading 

Promotion  is  not  only  from  step  to  step  in  the  same 
municipality,  but  from  municipality  to  municipality  ; 
so  that  if  the  clerkship  to  the  London  County  Council, 
worth  ^2000  a  year  with  the  chance  of  a  knight- 
hood, becomes  vacant,  every  provincial  Town  Clerk 
can  present  himself  as  a  candidate  for  the  post  with- 
out forfeiting  or  risking  his  already  secured  position 
in  any  way.  He  can  also,  of  course,  resign  his  post 
and  engage  in  commercial  enterprise  at  any  moment ; 
but  the  fact  that  he  practically  never  does  so  shews 
that  there  is  nothing  to  be  gained  by  such  a  step. 

On  the  whole,  then,  when  the  directors  of  a  joint 
stock  company  on  the  one  hand,  and  the  represent- 
atives of  the  ratepayers  on  the  other,  both  being  alike 
"amateurs  carrying  on  business  with  other  people's 
money,"  come  into  the  market  to  engage  an  execu- 
tive staff,  the  municipality  has  the  advantage  of  its 
competitor.  It  can  get  its  management  cheaper  as 
certainly  as  it  can  get  its  capital  cheaper. 


Ill 

WHEN    MUNICIPAL   TRADING   DOES 
NOT   PAY 

If  the  Medical  Officer  of  Health  wants  a  micro- 
scope or  the  County  Surveyor  a  theodolite,  it  will 
not  pay  the  municipality  to  set  up  a  scientific  instru- 
ment factory  to  produce  that  single  article,  possibly 
of  a  kind  which  can  be  produced  by  half  a  dozen 
firms  in  sufficient  quantity  to  supply  the  whole  of 
Europe.  Even  the  London  County  Council,  with 
all  its  bands,  has  not  yet  proposed  to  manufacture 
its  own  trombones.  The  demand  of  the  authority 
must  be  sufficiently  extensive  and  constant  to  keep 
the  necessary  plant  fully  employed.  The  moment 
this  limitation  is  grasped,  the  current  vague  terrors 
of  a  SociaHsm  that  will  destroy  all  private  enterprise 
laugh  themselves  into  air.  The  more  work  the  muni- 
cipality does,  the  more  custom  it  will  bring  to  private 
enterprise ;  for  every  extension  of  its  activity  involves 
the  purchase  of  innumerable  articles  which  can,  in 

13 


14  Municipal  Trading 

the  fullest  social  sense,  be  produced  much  more 
economically  by  private  enterprise,  provided  it  is 
genuinely  self-supporting,  and  does  not  spunge  on 
the  poor  rates  or  on  other  private  enterprises  for 
part  of  the  subsistence  of  its  employees  :  in  short, 
provided  it  works  under  a  "  fair  wages  "  clause. 

There  is  another  way  in  which  private  enterprise 
will  hold  its  own  even  in  pieces  of  work  sufficiently 
vast  to  use  up  the  necessary  plant.  Personal  talent 
in  all  its  gradations,  from  smartness  and  push  up 
to  positive  genius,  plays  as  important  a  part  in 
industry  as  it  does  in  the  fine  arts.  It  is  perfectly 
possible  for  a  born  captain  of  industry  to  be  in  a 
position  to  say  to  a  municipality  :  "  Here  is  such 
and  such  a  big  undertaking  to  be  carried  through. 
Although  I  may  have  to  raise  at  lo  per  cent  the 
capital  that  you  can  raise  at  1,-k  '■>  although  I  pay 
and  treat  my  employees  so  well  that  they  would 
not  exchange  my  employment  for  yours  ;  although 
I  have  to  pay  my  sub-chiefs  double  the  salaries 
you  can  get  men  of  the  same  quality  for  ;  yet  I 
will  so  organize  the  work,  and  so  command  and 
inspire  my  industrial  troops  that  I  will  do  the  work 
for  less  than  it  will  cost  you  to  do  it  yourselves, 
and  do  it  better,  and  have  a  satisfactory  profit  for 
myself  into  the  bargain.  Here  is  my  tender,  which 
is  lower  than  the  estimate  of  your  Works  Depart- 
ment !  "  Under  such  circumstances — assuming,  of 
course,  that  there  were  sufficient  reason  to  believe 
that  the  contractor  could  make  his  boast  good — the 


When  it  Does  Not  Pay         15 

tender  should  and  would  be  accepted.  Nobody 
who  has  any  experience  of  opening  tenders  for 
important  and  difficult  engineering  work  will  con- 
sider this  instance  far-fetched.  Even  when  the  total 
figure  is  under  ^20,000,  the  difference  between 
the  lowest  and  highest  tender  is  often  more  than 
100  per  cent.  Although  the  specification  may  be 
so  minutely  detailed  as  to  leave  very  little  room 
for  variation  in  the  nature  or  quality  of  the  pro- 
duct, one  contractor  will  undertake  work  for  j/^6000 
which  another  will  ask  _^  14,000  for,  without  any 
discoverable  ulterior  motives.  One  is  driven  to 
conclude  that  it  is  the  personal  factor  that  makes 
the  difi'erence.  Fertility  and  promptitude  in  de- 
vice, boldness  and  swiftness  in  execution,  power  of 
making  other  men  work  enthusiastically  :  all  these 
may  give  a  contractor  as  decisive  an  advantage  over  a 
borough  engineer  as  over  a  rival  contractor.  Some- 
times the  advantage  is  on  the  other  side  :  it  is  the 
municipal  official  or  the  committee  chairman  who 
suggests  improvements  and  economies  to  the  con- 
tractor, upon  whose  mechanical  routine  the  fresh 
.  minds  even  of  a  committee  of  amateurs  (which 
practically  always  includes  somebody  who  is  not  an 
amateur)  often  play  very  beneficially.  In  fact  there 
are  many  matters  in  which  municipal  experience  is 
so  necessary  that  even  the  ablest  contractor,  when 
he  first  touches  public  work,  can  learn  a  good 
deal  from  the  most  ordinary  municipality.  But  as 
municipal  experience  is  always  at  the  contractor's 


1 6  Municipal  Trading 

service,  there  is  nothing  in  municipal  trading  to 
deprive  an  able  enterpriser  of  the  legitimate  ad- 
vantage of  his  talent.  On  the  contrary,  it  protects 
him  against  the  sort  of  competition  that  he  really 
dreads  :  the  competition  of  scamping  and  sweating, 
of  underbidding  by  the  apparent  cheapness  that  is 
really  the  worst  sort  of  extravagance.  It  narrows 
the  competition  to  competition  in  ability  of  manage- 
ment and  excellence  of  product,  which  is  just  the 
sort  of  competition  in  which  he  can  win. 

It  follows  that  a  joint  stock  company,  if  it  is 
clever  or  lucky  enough  to  secure  a  manager  of 
exceptional  talent,  may  compete  successfully  with  a 
municipality  of  only  ordinary  managerial  resources. 
Or,  to  put  the  facts  in  the  order  in  which  they 
usually  occur,  an  industrial  genius,  by  forming  a 
joint  stock  company  to  provide  him  with  capital, 
may  do  so. 

But  the  business  of  the  world  is  mainly  ordinary 
work  carried  on  by  ordinary  men  and  women.  And 
all  such  public  business  of  sufficient  magnitude  to 
keep  the  necessary  plant  working  full  time  until  it 
has  paid  for  itself,  can,  when  it  is  purely  local,  be 
done  more  cheaply  by  municipal  than  by  private 
enterprise. 


IV 

THE    ANTI-SOCIAL  REACTIONS   OF 
COMMERCIAL   ENTERPRISE 

In  many  public  services,  labor  plays  a  larger  part 
than  machinery.  In  them,  consequently,  the  cost 
depends  much  more  on  wages  and  vigor  of  super- 
intendence than  on  the  rate  of  interest.  Take  for 
example  the  collection  of  dust  from  house  to  house, 
where  the  plant  required  consists  of  horses  and 
carts,  shovels  and  baskets.  Not  only  is  the  cost  of 
this  plant  negligible  compared  to  the  cost  of  the 
labor,  but  the  labor  is  the  motive  power  :  the  man 
drives  the  horse,  not  the  horse  the  man  :  the  man 
plies  the  shovel,  not  the  shovel  the  man.  It  is  quite 
otherwise  in,  for  example,  an  electric  lighting 
station.  There  the  cost  of  the  plant  is  higher  rela- 
tively to  the  cost  of  labor ;  and  the  plant  drives  the 
man  instead  of  the  man  driving  the  plant  ;  for  the 
steam  engine  and  the  dynamo  do  not  stop  and  pull 
out  a  pipe  when  the  foreman  goes  round  the  corner. 
There  is  another  difference :  the  labor  in  the  electric 

17 


1 8  Municipal  Trading 

lighting  station  is  skilled  and  organized  :  its  price 
is  standardized  by  Trade  Unionism ;  so  that  munici- 
palities and  commercial  companies  have  to  pay  the 
same  price  for  it,  and  therefore  cannot  enter  into 
a  competition  in  sweating.  The  dustman,  on  the 
other  hand,  is  an  unskilled,  unorganized,  casual 
laborer,  obtainable  by  private  employers  at  a  wage 
which  no  Progressive  municipality,  committed  to  a 
"moral  minimum"  subsistence  wage,  can  offer. 
Furthermore,  the  private  contractor,  who,  in  the 
dust  business,  is  seldom  very  delicate  in  handling 
his  employees,  can  slavedrive  his  men  in  a  way  that 
may  be  very  necessary  to  get  the  greatest  result  from 
their  labor  at  a  job  in  which  they  have  no  interest, 
but  which  in  municipal  employment  is  as  imprac- 
ticable as  it  is  undesirable. 

Now  it  is  clear  that  precisely  the  same  argument 
that  converts  even  the  Moderate  ratepayer  to  muni- 
cipal electric  lighting  (its  comparative  cheapness) 
converts  even  the  Progressive  ratepayer  to  private 
enterprise  in  dust  collecting  ;  for  no  municipality 
with  the  smallest  sense  of  decency  or  social  duty 
can  bring  out  its  bill  for  dust  collecting  at  so  low 
a  figure  as  the  sweating  contractor.  Consequently, 
as  long  as  the  question  is  settled,  as  it  too  often  is 
at  present,  by  the  ratepayer's  thoughtless  preference 
for  the  lowest  tender,  municipal  trading  will  be 
stopped  just  at  the  points  where  it  is  most  needed. 
For  a  moment's  reflection  will  convince  any  in- 
telligent  person   that   whereas  the  private  electric 


Anti-Social  Industrial  Reactions    19 

lighting  companies  do  their  work  as  well,  if  not  so 
cheaply,  as  the  municipalities,  the  most  disastrous 
inefficiency  and  unscrupulous  recklessness  are  pos- 
sible in  dust  collecting  and  such  cognate  work  as 
the  stripping  or  cleansing  of  rooms  after  cases  of 
infectious  disease.  What  is  more,  this  inefficiency 
and  recklessness  will  not  only  put  the  ratepayers  to 
heavy  private  expense  for  medical  attendance,  dis- 
ablement and  so  forth,  but  recoil  directly  on  the 
rates  themselves  in  sanitary  expenditure  ;  whereas 
the  extinction  of  the  electric  light  for  an  hour 
occasionally,  though  it  provokes  loud  complaints 
and  is  undeniably  exasperating,  costs  nothing  but 
the  inconvenience  of  the  moment  and  a  little  candle 
grease  and  lamp  oil.  We  must  therefore  conclude, 
not  merely  that  the  commercial  test  is  a  misleading 
one,  but  that  the  desirability  of  municipal  trading 
is  actually  in  inverse  ratio  to  its  commercial  profit- 
ableness.  A  few  illustrations  will  make  this  clear. 

Take  the  most  popular  branch  of  commercial 
enterprise :  the  drink  traffic.  It  yields  high  profits. 
Take  the  most  obvious  and  unchallenged  branch 
of  public  enterprise :  the  making  of  roads.  It  is 
not  commercially  profitable  at  all.  But  suppose  the 
drink  trade  were  debited  with  what  it  costs  in  dis- 
ablement, inefficiency,  illness  and  crime,  with  all 
their  depressing  effects  on  industrial  productivity, 
and  with  their  direct  cost  in  doctors,  policemen, 
prisons,  &c.  &c.  &c.  !  Suppose  at  the  same  time 
the  municipal  highways  and  bridges  account  were 


20  Municipal  Trading 

credited  with  the  value  of  the  time  and  wear  and 
tear  saved  by  them !  It  would  at  once  appear  that 
the  roads  and  bridges  pay  for  themselves  many 
times  over,  whilst  the  pleasures  of  drunkenness  are 
costly  beyond  all  reason.  Consequently  a  munici- 
palized drink  traffic  which  should  check  drinking 
at  the  point  of  excess  would  be  a  much  better  bar- 
gain for  the  ratepayers  than  our  present  system, 
even  if  the  profits  made  at  present  by  brewers  and 
publicans  were  changed  to  losses  made  up  by  sub- 
sidies from  the  rates. 

But  the  drink  traffic  is  not  the  best  illustration  of 
the  fallacy  of  the  commercial  test.  The  main  factor 
to  be  taken  into  account  in  comparing  private  with 
public  enterprise  is  neither  the  Drink  Question  nor 
any  of  the  other  Questions  which  occupy  so  many 
sectional  bodies  of  reformers,  but  the  Poverty 
Question,  of  which  all  the  others  are  only  facets. 
Give  a  man  a  comfortable  income  and  you  solve 
all  the  Questions  for  him,  except  perhaps  the  Ser- 
vant Question.  Now  the  all-important  difference 
between  the  position  of  the  commercial  investor 
and  the  ratepayer  is  that  whilst  the  commercial  in- 
vestor has  no  responsibility  for  the  laborers  whom 
he  employs  beyond  paying  them  their  wages  whilst 
they  are  working  for  him,  the  ratepayer  is  respon- 
sible for  their  subsistence  from  the  cradle  to  the 
grave.  Consequently  private  companies  can  and  do 
make  large  profits  out  of  sweated  and  demoralized 
labor  at  the  expense  of  the  ratepayers  ;  and  these 


Anti-Social  Industrial  Reactions    21 

very  profits  are  often  cited  as  proofs  of  the  superior 
efficiency  of  private  enterprise,  especially  when  they 
are  set  in  sensational  contrast  to  the  inability  of 
municipalities  to  make  any  commercial  profits  at  all 
in  the  same  business. 

For  example,  consider  the  case  of  a  great  dock 
company.  Near  the  docks  three  institutions  are  sure 
to  be  found  :  a  workhouse,  an  infirmary,  and  a  police 
court.  The  loading  and  unloading  of  ships  is  dan- 
gerous labor,  and  to  a  great  extent  casual  labor, 
because  the  ships  do  not  arrive  in  regular  numbers 
of  regular  tonnage  at  regular  intervals,  nor  does  the 
work  average  itself  sufficiently  to  keep  a  complete 
staff  regularly  employed  as  porters  are  at  a  railway 
station.  Numbers  of  men  are  taken  on  and  dis- 
charged just  as  they  are  wanted,  at  sixpence  an  hour 
(in  London)  or  less.  This  is  convenient  for  the  dock 
company  ;  but  it  surrounds  the  dock  with  a  de- 
moralized, reckless  and  desperately  poor  population. 
No  human  being,  however  solid  his  character  and 
careful  his  training,  can  loaf  at  the  street  corner 
waiting  to  be  picked  up  for  a  chance  job  without 
becoming  more  or  less  a  vagabond  :  one  sees  this 
even  in  the  artistic  professions,  where  the  same  evil 
exists  under  politer  conditions,  as  unmistakeably  as 
in  the  ranks  of  casual  labor.  The  shareholders  and 
directors  do  not  live  near  the  docks;  so  this  does 
not  affect  them  personally.  But  the  ratepayers  who 
do  live  near  the  dock  are  affected  very  seriously 
both  in  person  and  pocket.   A  visit  to  the  work- 


Z2  Municipal  Trading 

house  and  a  chat  with  one  of  the  Poor  Law  Guar- 
dians will  help  to  explain  matters. 

Into  that  workhouse  every  dock  laborer  can  walk 
at  any  moment,  and,  by  announcing  himself  as  a 
destitute  person,  compel  the  guardians  to  house  and 
feed  and  clothe  him  at  the  expense  of  the  rate- 
payers. When  he  begins  to  tire  of  the  monotony  of 
*'the  able  bodied  ward"  and  its  futile  labor,  he  can 
wait  until  a  ship  comes  in ;  demand  his  discharge ; 
do  a  day's  work  at  the  docks;  spend  the  proceeds 
in  a  carouse  and  a  debauch  ;  and  return  to  the  work- 
house next  morning,  again  a  destitute  person.  This 
is  systematically  done  at  present  by  numbers  of  men 
who  are  by  no  means  the  least  intelligent  or  capable 
of  their  class.  Occasionally  the  carouse  ends  in  their 
being  taken  to  the  police  station  instead  of  return- 
ing immediately  to  the  workhouse.  And  if  they  are 
unlucky  at  their  work,  they  may  be  carried  for 
surgical  treatment  to  the  infirmary ;  for  in  large 
docks  accidents  that  require  hospital  treatment  occur 
in  busy  times  at  intervals  of  about  fifteen  minutes. 
Finally,  when  they  are  worn  out,  they  subside  into 
the  workhouse  permanently  as  aged  paupers  until 
they  are  buried  by  the  guardians. 

Now  workhouses,  infirmaries  and  police  courts 
cannot  be  maintained  for  nothing.  Of  late  years 
workhouses  have  become  much  more  expensive  :  in 
fact  the  outcry  against  the  increase  of  the  rates, 
which  is  being  so  vigorously  used  to  discredit  muni- 
cipal trading,  is  due  primarily  and  overwhelmingly 


Anti-Social  Industrial  Reactions    23 

to  Poor  Law,  and  only  secondarily  to  educational 
and  police  expenditure,  and  has  actually  forced  for- 
ward those  branches  of  municipal  trading  which 
promise  contributions  out  of  their  profits  in  relief  of 
the  general  rate.  This  expenditure  out  of  the  rates 
on  the  workhouse  is  part  of  the  cost  of  poverty  and 
demoralization ;  and  if  these  are  caused  in  any  dis- 
trict by  the  employment  of  casual  labor,  and  its  re- 
muneration at  less  than  subsistence  rates,  then  it  is 
clear  that  a  large  part  of  the  cost  of  the  casual  labor 
is  borne  by  the  ratepayer  and  not  by  the  dock 
company.  The  dividends,  in  fact,  come  straight  out 
of  the  ratepayers'  pockets,  and  are  not  in  any  real 
sense  profits  at  all.  Thus  is  it  one  of  the  many 
ironies  of  the  situation  that  the  sacrifices  the  rate- 
payer makes  to  relieve  the  poor  really  go  largely  to 
subsidize  the  rich. 

A  municipality  cannot  pick  the  ratepayer's 
pocket  in  this  fashion.  Transfer  the  docks  to  the 
municipality,  and  it  will  not  be  able  to  justify  a  loss 
at  the  workhouse  and  police  station  by  a  profit  at 
the  docks.  The  ratepayer  does  not  go  into  the 
accounts  :  all  he  knows  is  whether  the  total  number 
of  pence  in  the  pound  has  risen  or  fallen.  Conse- 
quently the  municipality,  on  taking  over  the  docks, 
would  be  forced  to  aim  in  the  first  instance  at  or- 
ganizing its  work  so  as  to  provide  steady  permanent 
employment  for  its  laborers  at  a  living  wage,  even 
at  the  cost  of  being  overstaffed  on  slack  days,  until 
the  difficulty  had  been  solved  by  new  organization 


24  Municipal  Trading 

and  machinery,  as  such  difficulties  always  are  when 
they  can  no  longer  be  shirked.  Under  these  con- 
ditions it  is  quite  possible  that  the  profits  made 
formerly  by  the  dock  company  might  disappear ; 
but  if  a  considerable  part  of  the  pauperism  and  crime 
of  the  neighborhood  disappeared  simultaneously, 
the  bargain  would  be  a  very  profitable  one  indeed 
for  the  ratepayers,  though  the  Times  would  abound 
with  letters  contrasting  the  former  commercial  pros- 
perity of  the  dock  company  with  the  present  "  in- 
debtedness "  of  the  municipality. 

If  we  now  turn  back  from  the  grand  scale  of  com- 
mercial enterprise  as  represented  by  the  dock  com- 
pany to  the  petty  scale  represented  by  the  parish 
dust  contractor,  we  find  the  same  danger  of  false 
economy.  When  a  municipality  does  its  own  dust 
collecting  for  a  year,  it  is  usually  quite  easy  for  those 
members  whose  only  conception  of  economy  is  to 
reduce  every  item  of  expenditure  separately  to  the 
lowest  possible  figure,  to  obtain  estimates  from  con- 
tractors offering  to  do  the  work  for  less  than  it  has 
cost  the  municipal  Works  Department.  The  con- 
tractor's secret  is  a  simple  one  :  casual  labor  at  very 
low  wages  eked  out  by  tips  from  the  householders. 
And  here  the  consequences  reach  further  than  in  the 
case  of  the  docks.  The  collection  of  dust,  unlike  the 
unloading  of  ships,  has  a  direct  relation  to  the  health, 
comfort  and  energy  of  the  inhabitants.  The  indi- 
vidual ratepayer  who  fancies  he  has  saved  a  few 
pence  by  the  employment  of  a  contractor  may  lose 


Anti-Social  Industrial  Reactions    25 

anything  from  a  shilling  to  several  pounds  through 
illness,  and  suffer  a  constant  depreciation  of  his  own 
energy  and  that  of  his  employees,  if  the  dust  is  not 
punctually,  frequently,  and  efficiently  collected.  The 
annoyance  and  the  increase  of  domestic  labor  caused 
by  the  visits  of  a  casually  employed  underpaid  dust- 
man, even  when  he  is  conciliated  by  tips,  is  known 
only  to  the  woman  at  home,  whose  worries  have  an 
important  reaction  on  the  national  energy,  as  married 
men  well  know.  During  smallpox  epidemics,  which 
are  very  costly,  rates  may  be  heavily  increased  by 
the  results  of  cheap  contracting.  The  ratepayer  is 
always  paying  for  the  notifiable  infectious  diseases, 
especially  scarlet  fever,  diphtheria  and  measles  ;  and 
if  the  disinfection  after  these  and  after  smallpox  is 
done  by  casual  labor,  so  that  the  man  who  disinfects 
a  scarlet  fever  room  today  may  be  discharged  by  the 
contractor  in  the  evening,  and  go  straight  to  an 
ordinary  job  tomorrow,  the  disinfector  may  himself 
spread  more  infection  than  he  prevents.  In  sanitary 
work,  then,  the  cost  of  poverty  in  poor  law  relief, 
and  the  cost  of  the  demoralization  of  the  casual 
laborer  in  drunkenness  and  crime,  is  increased  by 
the  cost  of  inefficiency  and  hygienic  unscrupulous- 
ness  in  disease,  with  its  expensive  public  routine  of 
inspection,  disinfection,  cleansing  and  stripping,  in 
addition  to  its  privately  borne  cost  in  medical  attend- 
ance, nursing  and  disablement. 

But  it  is  not  yet  clear  that  the  remedy  is  for  the 
municipality  to  do  the  work.   It  may  be  argued  that 


26  Municipal  Trading 

under  a  proper  system  of  inspection  and  an  effective 
scale  of  resolutely  enforced  penalties,  a  contractor 
could  be  induced  to  do  it  as  thoroughly  as  the  muni- 
cipality itself,  without  resorting  to  casual  or  under- 
fed labor.  Let  us  suppose,  then,  that  a  contractor 
offers  to  do  municipal  work  at  a  figure  which  works 
out  lower  than  the  estimate  of  the  Works  Depart- 
ment even  when  the  cost  of  sufficient  inspection  and 
enforcement  of  penalties  to  secure  efficiency  is  added 
to  the  sum  named  in  the  contract ;  and  that  he  also 
undertakes  that  everyone  in  his  employment  shall, 
judged  by  the  standard  of  the  laboring  class,  be  in 
comfortable  circumstances.  Satisfactory  as  thisseems, 
there  will  still  be  a  heavy  loss  to  the  ratepayer  in 
accepting  the  contract  unless  everyone  employed  by 
the  contractor  actually  receives  a  full  living  wage,  as 
the  following  analysis  will  shew. 

The  payment  of  less  than  a  living  wage  is  pos- 
sible in  two  ways.  There  is  the  direct  form  in  which 
the  underpaid,  underfed, underhoused,underclothed, 
underrespected,  undercomforted  employee  draws  on 
his  or  her  vital  capital  for  a  few  years  and  is  then  dis- 
charged and  replaced  by  younger  and  less  exhausted 
travellers  on  the  same  road  to  ruin.  Contractors  can 
make  profits  on  relays  of  this  kind  just  as  publicans 
in  seaports  or  in  the  Australian  bush  can  make  profits 
by  relays  of  sailors  and  shepherds  who  come  to  them 
with  the  earnings  of  several  months'  work,  and  are 
thrown  out  by  the  potman  as  soon  as  all  their  money 
is  spent  in  drink.  On  this  form  of  sweating,  common 


Anti-Social  Industrial  Reactions    27 

as  it  is,  nothing  need  be  said.  To  everyone  intelligent 
enough  to  read  a  book  on  municipal  trading  it  must 
be  clear  without  argument  that  the  employment  of 
a  contractor  of  this  type  would  be  ruinously  dear  to 
the  ratepayer  even  if  the  contractor  did  the  work  for 
nothing  and  paid  a  bonus  in  aid  of  rates  into  the 
bargain. 

But  sweating  is  not  in  actual  practice  so  obvious 
and  simple  a  matter.  The  commonest  and  most 
dangerous  form  is  not  the  direct  and  sensationally 
cruel  sweating  of  a  scandalously  wretched  victim  by 
a  sordidly  brutal  employer,  but  the  unsensational 
and  quite  popular  sweating  of  one  industry  by  an- 
other, with  the  result  that  the  actual  starvation  of 
the  worker  often  takes  place  in  neither  industry, 
though  it  occurs  elsewhere  in  consequence  of  their 
relation.  This  economic  phenomenon,  which  was 
first  analysed  by  Mr.  and  Mrs.  Sidney  Webb,^  and  is 
only  beginning  to  be  appreciated  even  by  professional 
economists,  is  quite  compatible  with  normal  good- 
nature on  the  part  of  the  employer  and  normal  cheer- 
fulness and  decency  on  that  of  the  employee. 

Take  a  familiar  example.  A  married  laborer,  or 
a  shop  assistant  or  clerk  of  the  grade  that  makes  no 
pretension  to  gentility,  earns,  say,  from  eighteen  to 
twentyfour  shillings  a  week.  An  additional  six  shil- 
lings a  week  will  make  a  difference  in  the  comfort  and 
social  standing  of  the  family  enormously  greater  than 

1  Industrial  Democracy,  By  Sidney  and  Beatrice  Webb  (London 
Longmans,  1897). 


2  8  Municipal  Trading 

could  be  produced  by  raising  an  income  of  a  thousand 
a  year  to  five  thousand.  It  is  difficult  for  the  readersof, 
say,  the  Spectator  and  the  Times,  to  form  any  concep- 
tion of  the  magnitude  of  a  promotion  from  eighteen 
shillings  a  week  to  twentyfour,  or  from  twentyfour 
to  thirty.  Such  well-to-do  persons  are  often  scan- 
dalized when  their  attention  is  called  to  the  apparent 
ferocity  with  which  the  very  poor  resist  Factory 
Legislation  when  it  protects  their  children  from  being 
withdrawn  from  school  and  sent  out  to  earn  a  few  shil- 
lings at  an  early  age  ;  but  the  truth  is  that  if  five  shil- 
lings a  week  made  as  much  difference  to  a  duke  as  it 
does  to  many  laborers,  he  would  send  his  son  out  into 
the  streets  to  earn  it  at  ten  years  old  if  the  law  allowed 
him.  And  if  he  had  a  couple  of  sturdy  daughters,  he 
would  not  allow  them  to  eat  their  heads  off  at  home, 
so  to  speak,  when  they  might  go  into  a  factory,  or 
dust  yard,  or  shop,  and  bring  home  five,  ten,  twelve 
or  perhaps  even  fifteen  shillings  apiece.  If  he  had  no 
children,  or  not  enough  to  require  a  woman's  whole 
time  for  the  housekeeping,  his  duchess  would  give 
half  her  day  as  a  charwoman  in  a  lower  middle  class 
house  for  five  shillings  a  week  or  as  much  more  as  she 
could  get  for  it.  Such  family  circumstances  seldom 
occur  in  the  peerage  except  after  revolutions  ;  but 
millions  of  English  laborers'  homes  are  in  that  posi- 
tion. The  consequence  is  that  there  is  a  huge  mass  of 
the  labor  of  women  and  minors  always  in  the  market 
at  less  than  subsistence  rates  ;  and  whole  industries 
can  be  carried  on  by  such  labor  with  plenty  of  profit 


Anti-Social  Industrial  Reactions    29 

to  their  organizers.  But  they  are  carried  on  at  a  loss 
to  the  ratepayer,  who  has  finally  to  make  up  much 
more  than  the  whole  difference  between  the  wage 
paid  and  the  cost  or  subsistence,  except  where  the 
debt  is  cancelled  by  premature  death. 

Let  us  follow  the  process  in  the  instance  most 
favorable  to  it.  Alaborer  is  working  for  twentyfour 
shillings  a  week  (the  present  London  "  moral  mini- 
mum "  subsistence  wage)  for  the  London  County 
Council.  If  he  and  his  wife  can  get  a  boarder  at  six 
shillings  a  week  (for  which  a  separate  apartment  and 
much  more  food  than  would  otherwise  be  wasted  can 
hardly  be  expected)  the  twentyfour  shillings  become 
thirty:  an  immense  difference.  Economically,  it  does 
not  matter  to  the  laborer  whether  the  boarder  is  his 
own  son  or  daughter  orsomebody  else's.  The  London 
factory  girl  can  always  find  a  family  to  board  with  if 
she  has  none  of  her  own  ;  but  the  evil  is  so  far  ex- 
aggerated by  family  affection  that  a  girl  who  could 
bring  home  only  five  shillings  would  probably  have 
to  board  with  an  eighteen  shilling  laborer  instead  of 
a  twentyfour  shilling  one  unless  the  latter  were  her 
father. 

Now  it  is  clear  that  though  the  girl  (or  lad)  takes 
five  shillings  home,  and  thereby  eases  the  family  cir- 
cumstances very  appreciably ;  so  that  both  the  parents 
and  the  daughter  are  benefited  and  pleased,  the 
father  is  partly  supporting  the  girl  out  of  the  wage 
paid  him  by  the  County  Council.  That  means  that 
her  employer  is  spunging  on  the  ratepayer  for  part 


30  Municipal  Trading 

of  the  cost  of  the  labor  he  uses.  With  this  advantage 
he  tenders  to  the  Government  for  a  clothing  contract, 
or  to  one  of  the  Borough  Councils  for  a  dusting  con- 
tract. These  bodies,  being  now  mostly  bound  by  re- 
solution to  pay  full  living  wages  to  their  own  direct 
employees,  find  that  they  cannot  do  the  work  them- 
selves so  cheaply.  It  is  therefore  given  to  the  con- 
tractor in  the  name  of  economy ;  so  that  though  the 
ratepayers  pay  full  subsistence  wages  to  their  own 
adult  male  laborers,  yet  by  employing  a  contractor 
to  sweat  the  laborer's  daughter,  who  brings  her  wage 
up  to  subsistence  point  by  indirectly  sweating  him, 
they  get  the  labor  of  two  persons  for  less  than  a  sub- 
sistence wage  and  a  half,  even  if  they  pay  the  con- 
tractor ten  shillings  for  the  labor  he  pays  five  for.  No 
doubt  many  ratepayers  will  regard  this  as  a  clever 
stroke  of  business;  but  it  would  have  been  still 
cleverer  for  the  ratepayer  to  have  paid  the  laborer 
twentynine  shillings  a  week  for  the  services  of  him- 
self and  his  daughter  in  direct  employment  and  so 
saved  the  contractor's  profit.  Yet  even  from  this 
point  of  view  the  system  of  allowing  one  industry  to 
flourish  as  a  parasite  on  another  is  a  penny-wise  and 
pound-foolish  one,  as  we  shall  see  when  we  pursue 
the  process  to  its  end — for  we  are  by  no  means  done 
with  it  yet.  Meanwhile  it  must  be  remembered  that 
our  hypothetic  laborer  need  not  be  in  the  employ- 
ment of  the  County  Council.  He  may  be  in  the  em- 
ployment of  a  commercial  company  or  firm  at  a  living 
wage,   in  which  case  both  the  contractor  and  the 


Anti-Social  Industrial  Reactions    31 

public  body  accepting  his  contract  are  making  the 
company  pay  for  the  difference  between  what  the 
contractor  pays  his  employees  and  what  it  costs  them 
to  live. 

Let  us  now  follow  the  career  ot  the  laborer's 
daughter.  In  course  of  time  her  parents  die,  or  else 
get  past  working  and  become  dependent  on  their 
children  instead  of  helping  to  support  them.  Five 
shillings  a  week  will  not  meet  this  emergency.  If  the 
daughter  marries  a  man  earning  a  subsistence  wage, 
she  provides  for  herself  and  either  puts  her  parents 
on  her  husband's  back  (he  having  parents  of  his  own, 
probably)  or  else  lets  them  go  into  the  workhouse. 
But  this  solution  of  the  difficulty  does  not  always 
occur.  She  may  not  marry ;  and  if  she  does  her 
husband  may  die,  or  desert  her,  or  be  disabled,  or  be 
out  of  employment  in  times  of  bad  trade.  These 
things  occur  sufficiently  often  to  produce  at  all  times 
a  considerable  number  of  women  struggling  to  live 
and  to  bring  up  their  children  by  their  own  unaided 
exertions. 

Imagine  the  fate  of  such  a  woman.  She  seeks 
employment  in  a  factory,  and  is  offered  five  shillings 
a  week.  If  she  refuses  it  on  the  ground  that  she 
cannot  feed  herself  and  her  children  on  it,  plenty  of 
younger,  jollier,  better  looking  laborers'  daughters, 
with  their  fathers'  wages  to  fall  back  on,  will  take 
her  place  willingly.  She  tries  to  earn  something  as 
a  charwoman,  and  finds  that  plenty  of  laborers' 
wives  are  willing  to  "  come  in  for  an  hour  a  day  " 


32  Municipal  Trading 

for  the  same  five  shilling  wage,  though  in  this  case 
the  hour  may  mean  half  the  day,  a  midday  meal, 
and  certain  stray  perquisites  of  washing  and  the 
like  which  may,  at  best,  perhaps  double  the  nominal 
value  of  the  job.  Permanent  domestic  service  is 
barred  by  the  children  ;  and  so  is  boarding  with  a 
family.  Rent  may  be  anything  up  to  six  and  six- 
pence a  room.  At  every  turn  the  competition  of  the 
subsidized  laborer's  boarder,  whether  wife,  daughter 
or  stranger,  has  reduced  wages  below  subsistence 
point ;  and  there  is  seldom  any  prospect  of  an  im- 
provement, because  most  of  these  sweated  industries 
would,  if  they  were  compelled  to  pay  a  living  wage, 
either  disappear  altogether  or  else  save  themselves  by 
reorganizing  their  system,  introducing  machinery, 
and  employing  labor  of  quite  a  different  class.  The 
situation  is  a  desperate  one;  and  though  nearly  every 
middle  class  family  knows  (and  has  perhaps  helped 
to  sweat)  some  respectable  widow  who  has  weathered 
it,  no  middle  class  family  knows  or  tolerates  the 
many  widows,  deserted  wives,  and  single  women  of 
the  prevalent  "middling"  character,  who  give  up 
the  struggle,  and  drudge  and  drink  and  pilfer  their 
way  along  as  best  they  can,  qualifying  themselves 
and  their  children  for  poor  relief,  sick  relief,  and 
police  coercion,  and  forming  a  centre  of  infection 
for  that  disease  of  hopeless  inefficiency  and  uncon- 
scientiousness  in  daily  work  which  costs  the  rate- 
payers more  than  the  whole  budget,  imperial  and 
local,  civil  and  military. 


Anti-Social  Industrial  Reactions  33 

Thus  we  find  that  even  when  a  contractor  can 
guarantee  that  the  labor  he  employs  is  not  casual 
labor;  that  it  is  efficient,  regular,  respectable,  cheer- 
ful, healthy,  and  untouched  directly  by  pauperism, 
prostitution  or  crime;  and  that  he  pays  the  full  wage 
customary  in  his  industry,  it  will  still  not  pay  the 
ratepayer  to  accept  his  tender  unless  he  can  shew 
that  every  person  he  proposes  to  employ  on  the  work 
will  get  a  self-supporting  adult's  living  wage  for  it. 
Not  until  this  fundamental  condition  is  insisted  on 
can  a  simple  comparison  of  the  contractor's  tender 
with  the  Borough  Engineer's  estimate  be  accepted 
as  a  test  of  the  relative  merits  of  commercial  and 
municipal  enterprise. 

This  is  the  common  sense  of  the  modern  in- 
novation of  a  Fair  Wages  clause  in  all  industrial 
contracts  made  by  municipalities,  and  of  the  pay- 
ment of  a  full  living  wage  to  all  municipal 
employees. 


THE   BENEFICIAL   REACTIONS   OF 
COMMERCIAL   ENTERPRISE 

In  reading  the  last  chapter,  the  intelligent  advocate 
of  commercial  enterprise  must  have  been  oppressed 
with  a  sense  of  unfairness,  because  it  says  nothing 
of  the  employers  who  are  not  sweaters,  nor  of  the 
great  social  benefits  which  commercial  enterprise  has 
conferred  on  the  community.  If  commerce  has  its 
anti-social  reactions,  represented  by  the  prison,  the 
workhouse,  and  the  poor  rate,  what  about  its 
beneficial  social  reactions  ?  It  feeds  us,  clothes  us, 
provides  our  system  of  transport.  In  a  word,  our 
subsistence  and  our  civilization  are  its  daily  work, 
done  at  its  own  risk. 

Unfortunately,  though  it  does,  if  not  all  this,  at 
least  enough  of  it  to  establish  high  claims  to  our 
consideration,  it  does  so  at  the  commercial  dis- 
advantage of  being  unable  to  appropriate  the  total 
benefit  resulting  from  its  operations.  If  on  the  one 
hand  the  dock  company  is  able,  as  we  have  seen,  to 

34 


Beneficial  Industrial  Reactions     35 

spunge  on  the  ratepayer  for  the  maintenance  of  its 
labor,  and  to  throw  on  his  shoulders  the  social 
wreckage  its  methods  involve,  it  is,  on  the  other 
hand,  quite  unable  to  reap  for  itself  the  whole  value 
of  the  docks  to  the  seaport.  It  may  be  scraping 
together  a  very  paltry  dividend  with  the  utmost 
anxiety,  whilst  trade  to  the  value  of  many  millions 
is  coming  to  the  town  through  its  gates.  Indeed  it 
may  pay  no  dividend  at  all,  and  yet  see  commercial 
companies  all  round  it  making  handsome  profits 
which  would  instantly  disappear  if  the  docks  were 
swallowed  up  by  an  earthquake.  And  the  dust 
contractor,  with  all  his  opportunities  of  sweating, 
has  to  quote  such  low  figures  lest  his  competitors 
should  send  in  the  lowest  tender,  that  he  sometimes 
becomes  a  bankrupt  in  consequence  of  operations 
which  have  reduced  the  death-rate  of  the  parish  and 
saved  many  doctor's  bills. 

Now  it  is  the  chief  and  overwhelming  advantage 
of  public  enterprise  that  it  can  and  does  reap  the 
total  benefit  of  its  operations  when  there  is  a  benefit, 
just  as  it  suffers  and  is  warned  by  the  total  damage 
of  them  when  there  is  damage.  In  the  technical 
language  of  the  political  economists,  public  enter- 
prise goes  into  business  to  gain  the  value  in  use  or 
total  utility  of  industrial  activity,  whilst  commercial 
enterprise  can  count  only  on  the  value  in  exchange 
or  marginal  utility.  An  illustration  or  two  will 
make  the  meaning  clear. 

It  is  commonly  enough  understood  that  there 


36  Municipal  Trading 

are  certain  highly  beneficial  industrial  operations 
which  cannot  be  left  to  commercial  enterprise, 
because  their  profits  are  necessarily  communized 
from  the  beginning  ;  so  that  a  company  under- 
taking the  work  could  not  get  paid  for  it.  The 
provision  of  thoroughfares  in  a  city  is  a  case  in 
point.  It  has  never  been  possible  to  put  a  toll-bar  at 
the  end  of  every  city  street  and  compel  each  passenger 
to  pay  for  using  it.  Commercially,  therefore,  city 
street-making  "  does  not  pay  "  ;  so  it  is  left  to  the 
municipality,  with  the  result  that  the  ratepayers 
gain  enormously  by  their  expenditure.  What  is  not 
so  generally  recognized  is  that  this  power  of  the 
ratepayers  to  realize  profits  inaccessible  to  private 
speculators,  applies  to  a  greater  or  less  extent  over 
the  whole  field  of  public  industry.  Streets  and 
highways  are  only  a  part  of  the  industry  of  loco- 
motion :  commercial  enterprise,  which  cannot  touch 
them,  can  and  does  undertake  toll  bridges,  tram- 
ways, railways,  cab  services,  and,  in  short,  every 
means  of  locomotion  which  can  be  charged  for  per 
passenger.  But  though  commercial  companies  can 
make  a  dividend  in  this  way,  they  cannot  charge 
for,  and  consequently  cannot  reap  for  themselves, 
more  than  a  fraction  of  the  value  of  the  service 
they  render,  even  when  they  have  the  closest 
monopoly  of  the  traffic.  The  reason  is  that  the 
actual  passengers  are  not  the  only  people  benefited 
by  facility  of  communication.  Take  an  extreme 
case :  that  of  a  rich  invalid  in  the  country  whose 


Beneficial  Industrial  Reactions     37 

life  depends  on  the  arrival  of  a  London  surgeon  to 
operate  within,  say,  two  hours.  He  will  pay  any- 
thing, "  skin  for  skin,  yea,  all  that  a  man  hath  will 
he  give  for  his  life " — much  less  the  necessary 
hundred  guineas  or  so — to  bring  the  surgeon  to  his 
bedside  ;  and  the  railway  company  will  do  it  for 
him  ;  but  the  railway  company  will  not  get  the 
hundred  guineas.  It  will  get  no  more  than  if  the 
surgeon  were  starting  on  a  pleasure  trip,  and  were 
paying  for  the  fun  of  the  journey  instead  of  being 
heavily  paid  to  endure  its  fatigues.  In  the  same  way 
everybody  who  buys  a  pound  of  tea  or  a  ton  of 
coal  derives  from  the  commercial  enterprise  which 
has  established  communication  between  China  and 
Newcastle  a  benefit  which  is  out  of  all  proportion 
to  the  charge  for  freight  and  for  commercial 
travellers'  tickets  which  is  all  that  the  railway  and 
steamship  company  get.  Suppose  these  charges  were 
abolished  !  Suppose,  even,  that  people  became  so 
sensitive  to  the  discomforts  of  railway  travelling 
and  of  seasickness  that  they  had  to  be  paid  so  much 
per  mile  at  the  ticket  office  to  induce  them  to 
travel.  Private  enterprise  in  locomotion,  as  at 
present  organized,  would  be  ruined  at  once  ;  but 
it  would  still  pay  the  ratepayer  and  the  taxpayer 
handsomely  to  keep  the  railways  and  shipping  lines 
— in  other  words,  to  maintain  civilization — on  these 
terms. 

This   difference   is  fundamental.    It  quite   dis- 
ables all   commercial   comparisons   between    com- 


431715 


38  Municipal  Trading 

mercial  and  communal  industry.  When  a  joint 
stock  company  spends  more  than  it  takes,  it  is  carry- 
ing on  business  at  a  loss.  When  a  public  authority 
does  so,  it  may  be  carrying  on  business  at  a  huge 
profit.  And  there  is  no  question  here  of  the  shop- 
keeper's trick  of  selling  canary  seed  under  cost 
price  in  order  to  induce  bird  fanciers  to  buy  their 
flour  and  fodder  from  him.  A  municipality  might 
trade  in  this  manner  too,  if  it  saw  fit  :  for  instance, 
it  might  wire  houses  for  electric  light  under  cost 
price  in  order  to  stimulate  a  commercially  profit- 
able consumption  of  current.  But  it  is  quite  pos- 
sible that  a  municipality  might  engage  in  a  hundred 
departments  of  trade  ;  might  shew  a  commercial 
loss  on  every  one  of  them  at  the  end  of  every  half 
year  ;  and  yet  continue  in  that  course  with  the  full 
approval  and  congratulation  of  the  very  ratepayers 
who  would  have  to  make  up  the  loss.  Its  total 
gains  are  immeasurable  ;  and  its  success  can  only 
be  estimated  by  constant  reference  to  the  statistics 
of  public  welfare.  For  instance,  if  the  statistics  of 
health,  and  of  crime,  had  been  applied  a  century 
ago  to  test  the  alleged  prosperity  of  Manchester 
under  unrestricted  private  enterprise,  nobody 
would  have  boasted  of  a  factory  system  that  "  used 
up  nine  generations  of  men  in  one  generation"  as 
profitable  because  it  produced  a  commercial  peerage 
of  cotton  lords.  If  the  new  education  authorities 
adopt  the  recommendation  of  Dr.  J.  F.  J.  Sykes, 
and  have  the  children  in  the  schools  periodically 


Beneficial  Industrial  Reactions    39 

weighed  and  measured,  the  vital  statistics  thus 
obtained  will  provide  an  important  test  of  the 
social  value  of  the  industrial  order  under  which  the 
children  live.  Thus,  let  us  imagine  a  city  in  which 
the  poor  rates,  police  rates,  and  sanitary  rates  are 
very  low,  and  the  children  in  the  schools  flourish- 
ing and  of  full  weight,  whilst  all  the  public  services 
of  the  city  are  municipalized  and  conducted  with- 
out a  farthing  of  profit,  or  even  with  occasional  de- 
ficits made  up  out  of  the  rates.  Suppose  another  city 
in  which  all  the  public  services  are  in  the  hands  of 
flourishing  joint  stock  companies  paying  from  7  to 
21  per  cent,  and  in  which  the  workhouses,  the 
prisons,  the  hospitals,  the  sanitary  inspectors,  the 
disinfectors  and  strippers  and  cleansers,  are  all  as 
busy  as  the  joint  stock  companies,  whilst  the  schools 
are  full  of  rickety  children.  According  to  the  com- 
mercial test,  the  second  town  would  be  a  triumphant 
proof  of  the  prosperity  brought  by  private  enter- 
prise, and  the  first  a  dreadful  example  of  the  bank- 
ruptcy of  municipal  trade.  But  which  town  would 
a  wise  man  rather  pay  rates  in  .''  The  very  share- 
holders of  the  companies  in  the  second  town  would 
take  care  to  live  in  the  first.  And  what  chance 
would  a  European  State  consisting  of  towns  of  the 
second  type  have  in  a  struggle  for  survival  with  a 
State  of  the  first  .? 

This  demonstration  of  the  irrelevance  of  the 
ordinary  comparisons  of  commercial  profits  and 
expenses  with  municipal  profits  and  expenses  leads 


40  Municipal  Trading 

to  a  comparison  of  the  very  important  factor  of 
incentive.  The  commercial  incentive  stops  where 
its  profit  stops.  The  municipal  incentive  extends  to 
the  total  social  utility,  direct  and  indirect,  of  the 
enterprise.  What  is  more,  the  incentive  of  com- 
mercial profit  is  often  actually  stronger  on  the  side 
of  socially  harmful  enterprises  than  of  beneficial 
ones.  Vicious  entertainments  and  exhibitions,  un- 
scrupulous newpapers  and  books,  liquor  licenses  in 
neighborhoods  already  overstocked  with  drinkshops, 
are  only  the  obvious  instances,  just  as  our  com- 
mercially unprofitable  cathedrals,  national  galleries, 
and  blue  books  are  conspicuous  at  the  opposite 
extreme. 

But  it  may  be  contended  that  an  efficient  censor- 
ship would  bar  the  downward  path  to  commercial 
enterprise,  very  much  as  the  London  County  Council 
has  forced  the  London  music  halls  into  the  com- 
paratively decent  courses  which  have  produced  their 
present  enormous  prosperity.  The  fact  remains  that 
the  music  halls  did  not  see  their  own  interest  until 
they  were  forced  to  look  at  it  through  the  public 
eye  ;  and  this  goes  to  shew  that  the  limitation  of 
the  gains  of  commercial  enterprise  to  its  commercial 
dividend,  also  limits  its  mind,  and,  by  making  it 
habitually  blind  to  public  considerations,  prevents 
it  from  grasping  even  the  commercial  opportunities 
which  large  public  needs  offer. 

Take  a  simple  instance.  London  is  at  present 
helplessly  at  the  mercy  of  a  cab  service  which  cari- 


Beneficial  Industrial  Reactions     41 

catures  all  the  worst  weaknesses  of  commercial 
enterprise.  It  costs  a  shilling  to  go  ten  yards  in  a 
cab  :  consequently  the  stands  are  always  full  of  idle 
cabs,  and  the  most  energetic  policing  cannot  clear 
the  streets  of  crawling  ones.  Yet  if  you  want  to  take 
a  cab  for  an  hour,  which  hardly  anybody  does,  you 
get  it  for  a  halfpenny  a  minute.  What  is  wanted  is 
the  penny-a-minute  cab,  which  would,  for  hundreds 
of  thousands  of  Londoners  who  now  never  take  a 
cab  except  when  they  are  travelling  with  luggage, 
abolish  walking  for  all  purposes  except  constitu- 
tional ones.  The  penny  bus,  still  a  comparative 
novelty,  has  shewn  that  even  twopence  is  a  prohibi- 
tive fare  in  London ;  for  the  increase  of  passengers 
produced  by  the  reduction  to  a  penny  has  been  so 
lucrative  that  the  main  thoroughfares  will  not 
accommodate  all  the  omnibuses  that  seek  to  ply 
in  them.  The  London  cabmen  could  introduce  a 
penny-a-minute  fare  if  they  had  sufficient  business 
capacity ;  but  if  they  had,  they  would  not  be  cab- 
men. It  is  easy  to  say  that  the  cab  proprietors  would 
do  it  if  it  would  pay.  It  is  equally  easy  and  equally 
absurd  to  say  that  a  tube  railway  from  the  Mansion 
House  to  Uxbridge  Road  would  have  existed  ten 
years  ago  if  it  would  have  paid  ten  years  ago,  or 
that  the  grime  of  the  underground  railway  was  a  wise 
economy  of  its  directors.  The  truth  about  private 
enterprise  is  that  it  is  not  enterprising  enough  for 
modern  public  needs.  It  will  not  start  a  new  system 
until  it  is  forced  to  scrap  the  old  one.  And  the 

c  2 


42  Municipal  Trading 

reason — one  that  no  profusion  of  technical  educa- 
tion will  wholly  remove — is  that  only  a  fraction  of 
the  public  benefit  of  industrial  enterprise  is  com- 
mercially appropriable  by  it.  It  will  not  risk  colossal 
capitals  with  the  certainty  that  it  must  do  enormous 
service  to  the  public,  and  create  a  prodigious  un- 
earned increment  for  the  ground  landlords,  before 
it  can  touch  a  farthing  of  dividend ;  and  therefore, 
however  crying  the  public  need  may  be,  if  the 
municipalities  will  not  move  in  the  matter  nothing 
is  done  until  millionaires  begin  to  loathe  their  super- 
fluity and  become  reckless  as  to  its  investment  ; 
until  railways  are  promoted  merely  to  buy  tubes 
from  Steel  Trusts,  and  monster  hotels  floated,  after 
the  usual  three  liquidations,  to  buy  tables  and 
carpets  from  furniture  companies.  And  even  then 
what  is  done  is  only  enough  to  shew  that  it  should 
have  been  done  fifty  years  sooner,  and  might  even 
have  been  done  commercially  but  for  the  fatal, 
though  inevitable,  commercial  habit  of  mind  which 
must  consider  only  the  dividend  which  it  can  grasp 
and  not  the  social  benefit  that  it  must  share  with  its 
neighbors. 


VI 

COMMERCIAL  AND  MUNICIPAL  PRICES 

The  effect  of  municipal  enterprise  on  prices  is  an 
important  factor  in  the  situation.  The  rough  and 
ready  conclusion  as  to  market  prices  is  that  sellers 
will  compete  for  custom  by  underbidding  one  another, 
and  that  thus  free  competition  will  secure  the  utmost 
possible  cheapness  to  the  consumer.  The  simple  reply 
to  this  optimistic  receipt  for  a  self-acting  millennium 
is  that  as  soon  as  sellers  find  this  out  they  stop  com- 
peting ;  and  competition  is  replaced  by  conspiracy. 
The  far-seeing  and  capable  heads  of  the  trade  com- 
bine, and  finally  get  the  whole  trade  into  their  own 
hands,  even  if  they  have  to  sell  at  less  than  cost  for 
long  enough  to  ruin  all  the  small  manufacturers  who 
are  too  poor  or  too  stupid  to  join  the  combination. 
A  monopoly  being  thus  established,  a  market  price 
is  fixed,  and  retailers  are  supplied  only  on  condition 
of  their  selling  at  that  price. 

Now  it  does  not  follow  that  this  price  will  be 

43 


44  Municipal  Trading 

higher  than  the  old  competition  price  it  has  super- 
seded. On  the  contrary,  the  cost  of  production  is 
so  much  reduced  by  the  concentration  of  the  trade 
in  the  hands  of  the  most  intelHgent  masters,  manu- 
facturing on  a  large  scale  with  the  best  machinery 
and  the  largest  capitals,  and  public  consumption  is 
so  much  increased  by  every  reduction  in  price,  that 
a  frequent  result  of  the  substitution  of  combination 
for  competition,  and  of  relative  monopoly  for  com- 
plete freedom  of  trade,  is  the  appearance  in  the 
market  of  a  better  and  cheaper  article. 

But  there  are  limits  to  this  beneficial  process. 
The  Trust,  after  all,  is  not  a  philanthropic  enter- 
prise, which  is  exactly  what  the  municipality  is. 
The  Trust  aims  at  the  maximum  of  profit ;  and  its 
prices  will  always  be  fixed  so  as  to  carry  that  profit. 
The  municipality,  on  the  other  hand,  must  aim  at 
the  suppression  of  profit,  because  municipal  profit, 
as  we  shall  sec  presently,  has  the  effect  of  making 
the  consumer  pay  more  than  his  fair  share  of  the 
rates.  But  no  matter  what  result  is  aimed  at,  whether 
profit  or  no  profit,  that  result  can  be  produced,  not 
by  one  price  and  one  price  only,  but  by  any  one  of 
several  different  prices. 

To  make  this  clear,  take  a  case  :  a  fantastic  one 
to  begin  with.  Let  the  problem  be  to  fix  the  price 
of  a  newly  invented  patent  flying  machine  for  a 
single  passenger.  As  the  patent  excludes  competi- 
tion, the  patentee  may  fix  its  price  at  anything  from 
its  bare  cost  to  a  completely  prohibitive  figure.   Our 


Prices  45 

experience  of  the  automobile  shows  us  what  he  would 
do.  He  would  offer  the  asroplane  first  at  ^500,000. 
It  is  quite  possible,  in  view  of  the  insane  distribu- 
tion of  riches  at  the  present  time,  that  he  would  sell 
half  a  dozen  through  Europe  and  America  at  that 
figure  ;  for  ridiculously  rich  people  do  spend  such 
sums  on  much  less  attractive  whims.  That  is,  he 
would  receive  three  millions.  When  there  were  no 
more  buyers  at  half  a  million,  he  would  introduce 
the  Popular  iEropJane  at  ^  1 00,000.  Probably  there 
would  be  no  buyers  :  everybody  would  wait  con- 
fidently for  a  further  reduction.  He  would  then 
come  down  to  ^1000,  and  make  a  stand  at  that, 
probably,  for  some  years,  meanwhile  paying  artisans 
£22.  week  to  fly  about  in  aeroplanes  and  familiarize 
the  public  with  their  existence  and  practicability, 
just  as  until  quite  recently  the  most  expensive  auto- 
cars were  seen  running  on  our  main  roads,  crowded, 
not  with  dukes  and  millionaires,  but  with  people 
whose  average  family  income  was  clearly  not  much 
above  thirty  shillings. 

If  he  sold  3000  asroplanes  at  ;^iooo  apiece,  the 
takings  would  be  the  same  as  that  from  the  sale  of 
six  at  j^500,ooo.  A  sale  of  6000  at  ;/^500,  of 
30,000  at  ;(^ioo,  or  of  150,000  at  ^^20,  would  all 
produce  the  same  sum,  and  a  slight  modification  of 
the  larger  numbers  to  allow  for  varying  cost  of  pro- 
duction would  make  them  all  return  the  same  profit ; 
for  the  labor  of  organizing  the  production  and  dis- 
tribution of  a  million  and  a  half  aeroplanes  would 


46  Municipal  Trading 

be  enormously  greater  than  of  half  a  dozen,  whilst, 
per  contra,  the  market  would  be  much  more  stable, 
and  the  manufacture  of  the  million  and  a  half  would 
be  a  matter  for  machines  turning  out  aeroplanes  by 
the  gross  like  pins,  whilst  six  only  would  have  to 
be  built  as  primitively  as  a  village  carpenter  builds 
a  wheelbarrow.  All  these  changes  would  enter  into 
the  calculations  of  the  seller  ;  but  the  main  factor 
in  his  choice  would  be  the  sliding  scale  by  which 
the  number  of  buyers  goes  up  as  the  price  comes 
down.  And  it  is  clear  that  neither  the  lowest  price, 
nor  any  single  price  whatever,  would  have  a  decisive 
advantage  from  the  purely  commercial  point  of 
view.  There  might  be  hundreds  of  equally  con- 
venient prices  all  yielding  the  same  commercial 
result  ;  and  when,  after  a  long  series  of  trials, 
something  like  a  stable  customary  price  was  reached 
as  the  most  satisfactory  to  the  seller,  all  experience 
is  against  the  hope  that  it  would,  in  a  community 
stratified  as  ours  is  in  purchasing  power,  be  the 
price  at  which  the  most  socially  beneficial  use  of 
the  invention  would  be  possible.  It  would  either  be 
too  cheap,  like  gin,  or  too  dear,  like  house  room. 
As  in  the  case  of  the  motor  car,  the  whole  industry 
of  the  world  might  be  deprived  of  its  benefit  for 
years  whilst  producers  were  competing  for  the  custom 
of  plutocratic  young  sportsmen  with  racing 
machines  of  extravagantly  superfluous  horse  power. 
Let  us  take  a  more  prosaic  case.  Let  the  problem 
be  to  fix  the  price  per  word  of  a  cable  message,  say 


Prices  47 

to  the  United  States.  Here  there  Is  clearly  no  single 
most  profitable  price.  The  difference  between  the 
cost  of  sending  one  message  a  day  and  twenty  is 
negligible  :  consequently  the  profit  on  one  message 
a  day  at  a  pound  and  twenty  messages  at  a  shilling 
apiece  is  the  same.  Still,  it  saves  trouble  to  send  one 
message  instead  of  twenty  ;  so  the  commercial 
tendency  will  be  to  charge  a  pound.  At  present, 
accordingly,  cabling  to  the  United  States  is  an  ex- 
pensive luxury.  The  charge  is  a  shilling  a  word  ; 
and  a  couple  of  tiny  offices  in  Northumberland 
Avenue,  in  which  one  never  finds  as  many  as  two 
customers  at  the  same  time,  suffice  for  all  the  people 
in  that  populous  centre  who  wish  to  avoid  the  crowd- 
ing in  the  postal  telegraph  offices.  It  is  difficult  to 
believe  that  a  sweeping  reduction  in  this  heavy 
charge  would  reduce  profits,  however  much  it  might 
multiply  cables,  offices,  plant  and  staff.  But  it  is  not 
certain  that  it  would  increase  profits  ;  and  if  it  did 
not,  the  company  would  have  reduced  their  charges 
and  magnified  their  operations  for  nothing.  The 
huge  benefit  to  both  nations  from  the  development 
of  their  intercourse  would  not  go  into  the  com- 
pany's pocket. 

But  it  would  go  into  the  nation's  pocket.  It 
would  probably  pay  the  nation  to  make  telegraphic 
communication  with  the  American  continent  quite 
free  of  direct  charges  except  possibly  for  the  purpose 
of  checking  a  frivolous  use  of  the  cables.  At  all 
events  the  nation's  interest  in  keeping  charges  down 


48  Municipal  Trading 

is  as  clear  as  the  company's  interest  in  keeping  them 
up  to  the  highest  point  at  which  the  loss  by  restrict- 
ing the  use  of  the  cable  will  be  less  than  the  gain  by 
high  rates. 

A  municipality  does  not  meddle  with  trans- 
atlantic cables  ;  but  it  does  with  telephones.  Its  ad- 
vantage over  local  commercial  enterprise  is  of  the 
same  nature.  There  is  not  one  price  only  available, 
and  that  the  most  profitable,  but  several  prices  all 
yielding  the  same  total  profit.  It  is  the  interest  of 
the  private  company  to  select  the  highest  of  these, 
and  the  interest  of  the  public  and  of  the  municipality 
to  select  the  lowest.  There  is,  however,  one  very 
important  difference  between  a  telegraph  and  a  tele- 
phone service.  Competition  between  telegraph  com- 
panies may  duplicate  cables  unnecessarily ;  but  it  may 
nevertheless  keep  down  charges.  But  competing 
telephone  exchanges  are  intolerable :  the  nature  of 
the  service  compels  monopoly.  At  Tunbridge  Wells, 
where  the  municipality  established  an  exchange  in 
competition  with  a  private  company,  all  the  argu- 
ments in  favour  of  municipal  enterprise,  and  all  its 
promises  of  a  cheaper  service,  broke  down  before 
the  nuisance  of  ringing  up  your  butcher  or  baker, 
your  doctor  or  solicitor,  and  finding  that  he  was  on 
the  rival  exchange.  It  was  perhaps  natural  for  the 
ratepayers  of  Tunbridge  Wells  to  sell  their  own  baby 
exchange  rather  than  buy  the  grown-up  one  of  the 
commercial  company ;  but  it  was  not  the  final  solu- 
tion of  the  difiiculty  ;  and  the  victory  was  not  really 


Prices  49 

one  of  private  enterprise  over  municipal  socialism, 
but  of  national  over  local  organization  of  an  essenti- 
ally national  service.  The  private  company  was  not 
tied  by  the  municipal  boundary  of  Tunbridge  Wells ; 
and  this  advantage  made  it  irresistible  when  the 
question  arose  which  competitor  should  swallow  the 
other. 

Take  a  third  case  of  the  simplest  oilshop  order. 
Let  the  problem  be  to  fix  the  retail  price  per  gallon 
of  the  petroleum  of,  say,  the  Standard  Oil  Trust. 
A  practical  monopoly  of  the  petroleum  supply  may 
be  assumed  ;  but  a  monopoly  of  petroleum  is  not  a 
monopoly  of  light.  Petroleum  could  be  put  out  of 
use  altogether  by  too  high  a  price.  On  the  other 
hand  every  reduction  of  price  means  an  increase  of 
consumption.  Lamps  are  lighted  earlier  and  extin- 
guished later ;  duplex  lamps  are  substituted  for  single 
wicks ;  the  poor  man  puts  a  light  in  the  passage  as 
well  as  in  the  room  ;  oil  stoves  come  into  use  ; 
oil  is  used  lavishly  in  cleaning  bicycles  and  sewing 
machines ;  and  though  the  difference  may  not  amount 
to  more  than  a  spoonful  a  day  per  house,  yet  a  spoon- 
ful multiplied  by  millions  has  to  be  reckoned  with 
by  a  Trust.  Under  these  circumstances  petroleum 
is  likely  to  be  very  cheap.  The  cost  of  production 
and  distribution  will  be  economized  to  the  utmost 
by  the  monopoly  because  one  monopoly  factory  will 
do  the  work  of  ten  competing  ones  with  much  less 
than  ten  times  the  land  and  plant ;  and  a  Trust  can 
control  railways  and  manipulate  freights  ;  whilst  the 


50  Municipal  Trading 

fact  that  a  low  price  means  an  enormous  demand, 
and  that  every  attempt  to  put  on  an  extra  penny  a 
gallon  cuts  off  that  demand  so  seriously  as  to  reduce 
the  gross  profit  instead  of  increasing  it,  acts  as  a  far 
better  guarantee  of  cheapness  than  the  old-fashioned 
competitive  system.  The  Trust,  in  fact,  has  a  larger 
appetite  for  customers  than  the  scattered  competitors 
it  has  extinguished ;  and  so,  from  the  social  point 
of  view,  the  Trust  is  a  very  welcome  industrial  de- 
velopment, and  the  present  outcry  against  it  is  but 
a  straw  fire  compared  to  the  blaze  of  indignation 
which  would  break  out  if  the  old  system  were 
miraculously  reimposed  on  the  consumer. 

A  municipality  could  not  compete  with  the  Oil 
Trust  because,  as  we  shall  see  later,  it  is  disabled  by 
its  boundaries.  It  may  be  argued  that  a  public  body 
could  undersell  a  Trust  because  it  does  not  aim  at 
profit.  But  in  practice,  as  there  is  a  good  deal  of 
commercial  human  nature  in  public  bodies,  it  would 
be  found  that  without  the  incentive  of  a  little  profit 
to  boast  of  at  elections  the  public  body  would  aim 
rather  at  the  minimum  of  trouble  to  itself  than  at 
the  maximum  demand  for  oil.  Municipalities  as  a 
matter  of  fact  do  always  make  as  much  profit  as 
they  dare  ;  and  though  this  is  beyond  all  question 
unfair  to  the  consumer,  who  is  made  to  contribute 
more  than  his  share  to  the  rates,  yet  the  incidence 
of  rating  is  already  so  unfair — indeed,  so  absurd — 
that  to  object  to  a  small  profit  on  this  ground  would 
be    to    strain   a   gnat  whilst   swallowing   a   camel, 


Prices  5 1 

especially  as  without  the  incentive  of  this  profit  the 
tendency  would  be  to  a  high  price  and  a  restricted 
supply  rather  than  to  a  low  price  and  an  extended 
supply.  The  real  advantage  of  public  enterprise  would 
therefore  be,  not  the  complete  reduction  of  price  to 
cost,  but  the  application  of  the  profits  to  the  public 
good  instead  of  their  private  appropriation  by  idle 
shareholders.  The  United  States,  by  owning  the 
Standard  Oil  Trust,  could  avoid  such  horrible  ab- 
surdities as  the  annual  export  of  millions  of  dollars 
in  dividends  to  be  wasted  in  parasitic  fashionable 
life  in  European  capitals  and  Mediterranean  pleasure 
cities,  whilst  large  sections  of  the  American  popula- 
tion are  miserably  poor.  But  even  on  this  point  the 
Trust  is  better  than  the  mob  of  small  competitors ; 
for  if  profits  are  not  socialized  it  is  better  to  con- 
centrate them  on  a  few  millionaires,  who  are  forced 
by  the  mere  weight  of  their  superfluities  to  throw 
whole  masses  of  money  back  on  the  public  in  the 
manner  of  Mr.  Carnegie,  than  to  scatter  them  on  a 
crowd  of  "  successful  tradesmen  "  whose  children 
become  unprofitable  pensioners  on  the  nation,  and 
cannot  afix)rd  to  give  anything  back  except  an 
occasional  subscription  to  maintain  the  evil  of  irre- 
sponsibly managed  begging  hospitals. 

The  tendency  of  private  enterprise,  with  its  pre- 
ference for  "  a  high  class  connection,"  and  its  natural 
desire  to  make  the  rate  of  profit  as  high  as  possible, 
is  to  keep  up  prices  to  the  point  beyond  which  the 
contraction  of  the  market  would  make  the  trade 


52  Municipal  Trading 

unstable.  The  sudden  relntroduction  of  competi- 
tion by  a  new  departure — for  example  the  tube  rail- 
way suddenly  upsetting  the  monopoly  of  the  old 
underground  in  London — always  brings  down  prices, 
a  fact  which  proves  that  private  enterprise  maintains 
the  highest  price  that  will  pay  instead  of  the  lowest. 
This  tendency  is  clearly  an  anti-social  one.  Through 
its  operation  the  various  inventions  which  are  the 
sole  real  assets  of  modern  civilization,  instead  of 
raising  the  standard  of  life  of  the  whole  population, 
may  remain  for  a  long  time  the  toys  of  the  rich, 
who  themselves  cannot  escape  from  an  overwhelm- 
ing environment  of  primitive  poverty,  to  which 
more  civilization  means  only  less  air,  less  house 
room,  less  decency,  less  health,  and  less  freedom. 

The  pressure  on  a  municipality  is  in  the  opposite 
direction.  Once  its  inertia  is  overcome,  all  its  in- 
ducements and  obligations  tend  to  cheapness  and 
the  widest  possible  diffusion  of  its  products.  Instead 
of  the  large  number  of  prices  that  are  equally  re- 
munerative commercially,  it  has  to  consider  only 
one  ideal  price  :  that  is,  cost  price  on  the  basis  of 
the  greatest  attainable  number  of  customers  ;  and 
any  modification  it  makes  in  this  price  can  be  dic- 
tated only  by  its  desire  to  raise  its  revenue  as 
conveniently  and  popularly  as  possible,  or  by  con- 
siderations of  social  welfare,  such  as  those  which 
make  Bibles  artificially  cheap  and  brandy  artificially 
dear.  In  short,  the  radical  antagonism  between  en- 
terprise that  has  for  its  object  the  making  of  the 


Prices  53 

largest  possible  profit  at  the  expense  of  the  com- 
munity, and  that  which  aims  simply  at  supplying 
public  needs  as  cheaply  and  effectively  as  possible, 
inevitably  tells  heavily  in  favor  of  municipal  trading. 
The  incidental  public  benefit  of  private  enterprise 
has  been  very  great,  faute  de  mieux^  in  the  anarchic 
period  of  transition  from  medievalism  to  modern 
collectivism,  during  which  we  should  have  had  no 
industry  at  all  without  private  enterprise.  But  the 
benefit  has  been  at  best  incidental,  and  has  stopped 
short,  by  the  laws  of  its  own  nature,  of  the  attain- 
able maximum.  The  benefits  of  public  enterprise 
are  not  incidental  :  they  are  the  sole  reason  for 
its  existence  ;  and  there  is  nothing  to  limit  them 
but  remediable  defects  of  political  machinery  and 
those  human  infirmities  which  are  common  to  pri- 
vate and  public  interest  alike. 

The  one  drawback  is  municipal  Inertia.  It  is  as 
possible  for  a  local  authority  as  for  an  imperial 
government  to  do  nothing  over  and  above  the  work 
that  cannot  be  left  undone  without  obvious  and 
immediate  disaster.  Private  enterprise,  on  the  other 
hand,  must  discover  and  supply  public  wants  or  else 
starve.  Unfortunately,  this  incentive,  instead  of 
being  strongest  where  the  public  need  is  most  vital, 
and  weakest  where  it  is  most  frivolous,  is  gradu- 
ated in  just  the  opposite  way.  The  public  need  is 
greatest  where  the  purchasing  power  is  least :  the 
commercial  incentive  is  strongest  where  purchasing 
power  is  heaped  up  in  ridiculous  superfluity.  Private 


54  Municipal  Trading 

enterprise  begins  with  lOO  horse  power  racing  auto- 
mobiles, and  reluctantly  filters  down  to  cheap  and 
useful  locomotion  :  public  enterprise  begins  at  the 
other  end  and  helps  those  who  cannot  individually 
help  themselves.  Thus,  even  if  we  grant  that  the 
desire  to  make  money  is  a  stronger  incentive  than 
public  spirit  and  public  need,  we  must  admit  that 
it  is  strongest  at  the  wrong  end,  and  dwindles  to 
nothing  at  the  right  end,  whereas  public  spirit  and 
public  need  are  strongest  at  the  right  end  and  are 
not  wanted  at  the  other  except  for  repressive  pur- 
poses. It  may  be  said  that  the  remedy  is  a  redistri- 
bution of  purchasing  power  and  not  more  municipal 
trading.  This  proposition  is  quite  unquestionable 
from  the  extreme  Socialist  point  of  view  ;  but  as 
the  present  opponents  of  municipal  trading  would 
certainly  reject  this  remedy  as  more  fatal  to  their 
hopes  than  the  disease,  it  need  not  be  dealt  with 
here  further  than  by  an  emphatic  reminder  that 
poverty  is  at  the  root  of  most  of  our  social  diffi- 
culties ;  that  it  is  incompatible  with  liberty  and 
variety ;  and  that  it  has  put  the  opponents  of  muni- 
cipal trading  so  far  in  a  cleft  stick  that  they  cannot 
abolish  poverty  except  by  public  enterprise,  and  can- 
not escape  public  enterprise  except  by  the  abolition 
of  poverty. 


VII 

DIFFICULTIES   OF   MUNICIPAL 
TRADING 

Electrical  Enterprise 

So  far,  the  case  for  Municipal  Trading  seems  clear 
enough.  Indeed,  on  all  the  issues  raised  by  its 
opponents,  it  comes  out  of  the  controversy  trium- 
phantly. But  if  a  simple  verdict  of  Go  Ahead  be 
delivered,  the  real  difficulties,  which  are  seldom 
mentioned  and  never  appreciated  in  popular  con- 
troversy, will  soon  assert  themselves. 

To  begin  with.  Private  Enterprise  enjoys  a  de- 
gree of  license  which  may  be  described  as  almost 
anarchic.  It  has  for  its  area  the  heaven  above,  the 
earth  beneath,  and  the  minerals  under  the  earth. 
National  frontiers  and  local  boundaries  do  not  exist 
for  it.  In  the  matter  of  advertizing  it  is  exempt 
from  all  moral  obligations  :  the  most  respectable 
newspapers  give  up  the  greater  part  of  their  space 

55 


56  Municipal  Trading 

every  day  to  statements  which  every  well  instructed 
person  knows  to  be  false,  and  dangerously  false,  since 
they  lead  people  to  trust  to  imaginary  cures  in 
serious  illnesses,  and  to  ride  bicycles  through  greasy 
mud  in  heavy  traffic  on  tires  advertized  as  "  non- 
slipping  "  :  in  short,  to  purchase  all  sorts  of  articles 
and  invest  in  all  sorts  of  enterprises  on  the  strength 
of  shameless  lies,  perfectly  well  known  to  be  lies  by 
the  newspaper  proprietor,  who  would  at  once  dis- 
miss the  editor  if  a  falsehood  of  the  same  character 
appeared  in  a  leading  article.  Its  operations  are 
practically  untrammelled  by  restrictive  legislation  ; 
the  accepted  principle  of  the  State  towards  it  is 
laisser-faire ;  it  has  an  overwhelming  direct  repre- 
sentation in  parliament ;  and  in  private  life  there 
are  ten  thousand  people  engaged  in  it  for  every  one 
who  knows  anything  of  the  municipality  of  which 
he  is  a  constituent  except  that  it  periodically  extorts 
money  from  him  by  the  hands  of  the  detested  rate 
collector.  Political  ignorance,  individual  selfishness, 
the  habit  of  regarding  every  piece  of  public  work 
as  a  job  for  somebody,  the  narrowness  that  makes 
the  Englishman's  house  a  castle  to  be  defended 
contra  mundum^  the  poverty  and  long  hours  of  work 
that  leave  the  toiler  no  energy  to  spare  for  public 
work  or  public  interest,  the  vague  association  of 
public  aid  with  pauperism  and  of  private  enterprise 
with  independence,  the  intense  sense  of  caste  which 
resents  municipal  activity  as  the  meddling  of  pre- 
tentious tradesmen  and  seditious  labor  agitators  : 


Electrical  Difficulties  57 

all  these  symptoms  of  the  appalling  poverty  of 
public  spirit,  and  the  virulence  and  prevalence  of 
private  spirit  in  our  commercial  civilization,  are  on 
the  side  of  private  enterprise,  and  have  hitherto 
secured  for  it  a  monopoly,  as  far  as  a  monopoly  was 
practicable,  of  the  national  industry  :  a  monopoly 
that  is  only  slowly  giving  way  before  the  manifest 
private  advantages  of  municipal  employment  to  the 
employee  class,  and  of  municipal  gas  and  water  to 
the  employer  class. 

Municipal  enterprise,  on  the  other  hand,  is 
handicapped  from  the  outset  not  only  by  all  the 
influences  just  cited,  but  by  the  national  presump- 
tion against  State  action  of  all  kinds  inherited  from 
the  long  struggle  for  individual  liberty  which  fol- 
lowed the  break-up  of  the  medieval  system.  That 
struggle  led  men  to  assume  that  corruption  is  in- 
herent in  public  offices  ;  that  a  trading  municipality 
is  the  same  thing  as  a  seventeenth  century  mono- 
poly ;  and  that  the  remedy  for  all  such  evils  is  free 
competition  between  private  enterprisers  rigidly 
protected  from  public  competition.  Nominally  this 
view  is  obsolete  ;  but  in  practice  it  is  still  assumed 
that  whereas  private  men  and  private  companies  may 
do  anything  they  are  not  expressly  forbidden  to  do,  a 
municipality  may  do  nothing  that  it  is  not  expressly 
authorized  to  do ;  and  as  every  authorization  has  to 
come  from  a  parliament  in  which  private  enterprise 
is  powerfully  represented,  the  municipalities  so  far 
can  get  little  more  than  the  refuse  of  private  enter- 


58  Municipal  Trading 

prise.  The  municipality,  in  fact,  does  not  enjoy 
freedom  of  trade,  and  the  private  capitalist  does, 
the  natural  result  being  that  whilst  municipal  enter- 
prise is  struggling  to  get  trading  Bills  through 
hostile  parliaments,  and  agitating  for  larger  powers, 
private  enterprise  is  forming  gigantic  industrial 
conspiracies  which  ruthlessly  stamp  out  the  old- 
fashioned  huckstering  competition  on  which  the 
nation  foolishly  relied  for  protection  against  mono- 
poly, and  establishing  a  predatory  capitalistic  col- 
lectivism which  has  knocked  more  anti-Socialist 
nonsense  out  of  the  English  people  in  the  last  five 
years  than  the  arguments  and  pamphlets  of  the 
Socialists  have  done  in  the  last  fifty.  Nevertheless 
the  race  between  municipal  and  national  Collectiv- 
ism, and  the  frankly  plutocratic  Collectivism  of 
the  Trusts,  is  one  in  which,  under  existing  circum- 
stances, the  municipalities  have  no  chance  except  in 
the  industries  which  the  Trusts  will  not  touch 
because  they  do  not  pay  in  the  commercial  sense. 

To  illustrate  this,  let  us  take  the  leading  instance 
to  the  contrary  :  the  provision  of  electric  light  and 
locomotion.  A  moment's  consideration  will  shew 
that  the  successes  of  municipal  electricity  belong  to 
the  early  stages  of  the  industry,  and  can  only  be 
maintained  if  the  municipalities  deliberately  check 
its  inevitable  development  by  suppressing  private 
competitors.  So  long  as  private  enterprise  can  range 
over  the  whole  country,  whilst  municipal  enterprise 
cannot  cross  its  own  little  boundary,  so  long  will 


Electrical  Difficulties  59 

the  attainment  of  the  maximum  of  economy  and 
efficiency  by  the  municipahty  be  impossible.  In 
London  the  absurdity  of  the  separate  electric  light- 
ing concerns  of  the  Borough  Councils  can  be  got 
over  by  their  consolidation  in  the  hands  of  the 
County  Council,  which  would  then  have  an  area  at 
its  disposal  which  no  single  private  enterprise  seems 
yet  prepared  to  handle  as  a  whole.  But  the  ad- 
ministrative county  of  London  is  not  England  ;  and 
even  London's  boundaries  do  not  form  the  most 
economical  terminuses  for  her  electric  trams.  In  the 
country,  municipal  enterprise  is  reduced  to  absurdity 
by  the  smallness  of  the  areas  and  their  openly  non- 
sensical boundaries.  Mr.  H.  G.  Wells's  description 
of  his  residence  on  the  boundary  between  Sandgate 
and  Folkestone^  (two  places  as  continuous  as  May- 
fair  and  St.  James's),  a  boundary  which  no  municipal 
tramcar  or  drain-pipe  can  cross,  shews  the  hope- 
lessness of  substituting  public  for  private  Collectiv- 
ism there.  A  shipping  firm  whose  vessels  were 
forbidden  to  cross  any  degree  of  latitude  or  longi- 
tude might  as  easily  compete  with  the  Peninsular 
and  Oriental  as  the  Folkestone  municipality  with  a 
Trust  which  could  (and  would)  operate  over  a  whole 
province. 

Abroad,  this  difficulty  is  emphasized  by  the  use 
of  water  power  as  a  source  of  electricity.  If  Niagara 
happened  to  be  one  of  the  falls  of  the  Regent's 

1  Mankind  in  the  Making.  By  H.  G.  Wells  (London,  Chapman 
and  Hall,  1903),  Appendix,  p.  410. 


6o  Municipal  Trading 

Canal,  the  fact  that  St.  Pancras  and  Marylebone  may 
not  hght  Shoreditch  with  electricity  would  be  an 
unbearable  folly.  In  England  we  look  to  our  coal 
for  power ;  and  we  are  coming  to  the  end  of  our 
easily  accessible  coal,  whilst  other  countries  are  as 
yet  coming  only  to  the  beginning  of  theirs.  The  loss 
of  our  relative  advantage  in  power  will  sooner  or 
later  force  us  to  look  to  our  water  power.  We  have 
not,  like  the  Swiss  and  the  Italians,  an  abundance 
of  waterfalls.  But  we  have  the  tides ;  and  what 
hardly  any  of  us  yet  seem  to  realize,  in  spite  of  the 
fascinating  lectures  of  Mr.  H.  J.  Mackinder  on 
political  geography,^  is  that  tides  such  as  ours,  in- 
stead of  being  universal,  occur  only  in  a  very  few 
places  on  the  globe ;  so  that  if  we  could  harness  to 
our  industries  the  stupendous  daily  rush  of  millions 
of  tons  of  tidal  water  through  the  Pentland  Firth, 
not  only  need  no  Englishman  ever  go  underground 
again  for  fuel,  but  the  advantage  would  not  be 
shared  directly  by  other  nations  who  have  no  such 
tides  at  their  disposal.  I  mention  this  grossly  in- 
sular consideration  to  those  whose  social  sympathies 
stop  at  the  frontier. 

The  alternative  to  water  power  is  the  generation 
of  electric  current  from  coal  at  the  pit's  mouth,  and 
its  distribution  therefrom  without  regard  to  admini- 
strative boundaries  over  areas  which  include  several 
municipal  districts. 

1  Britain  and  the  British  Seas.  By  H.  J.  Mackinder  (London, 
Heinemann,  1902),  p.  339,  etc. 


Electrical  Difficulties  6i 

In  neither  case  can  the  electrical  industry  be 
handled  adequately  by  local  authorities  whilst  their 
activity  is  limited  to  existing  areas.  The  boundaries 
of  these  areas  correspond  to  no  contemporary  reality 
in  distribution  of  population  or  natural  configura- 
tion. Many  of  them  are  imaginary  lines  drawn  along 
the  middle  of  busy  streets  and  closely  inhabited 
roads  :  others  cut  across  country  like  the  scent  of 
a  hunted  fox.  In  London  at  present,  neither  the 
London  County  Council  nor  the  commercial  elec- 
tric traction  companies  can  run  an  electric  tram 
through  a  London  borough  without  the  consent  of 
the  Borough  Council,  which,  being  too  small  to 
provide  London  with  tramways  itself,  can,  and  often 
does,  prevent  other  people  from  doing  it,  mostly 
on  grounds  which  are  beyond  human  patience — for 
instance,  that  Tottenham  Court  Road  rivals  Bond 
Street  as  a  fashionable  shopping  centre,  and  that  if 
tram-lines  were  laid  along  it  the  aristocracy  would 
desert  it.  Even  when  the  London  County  Council 
is  given  power  to  over-ride  this  sort  of  opposition, 
it  will  be  unable  to  touch  railways,  though  it  is 
clear  enough  that  the  problems  of  London  housing 
will  never  be  solved  as  long  as  Surrey  and  Kent 
remain  for  the  most  part  less  accessible  to  men  who 
have  daily  business  in  London  than  Yorkshire  and 
Lancashire.^ 

^  I  have  myself  had  to  leave  a  house  situated  on  the  main  road 
from  London  to  Portsmouth,  with  the  fortieth  milestone  at  my  gate, 
because  I  could  not  keep  appointments  in  London  in  less  than  three 
hours  from  door  to  door.  The  case  of  the  more  remote  residents 
may  be  imagined. 


62  Municipal  Trading 

Here,  then,  we  find  how  impossible  is  the  situa- 
tion set  up  by  the  growth,  within  the  last  quarter 
century,  of  a  vast  machinery  of  modern  industrial 
collectivism  on  the  lines  of  a  parochial  system  of 
localization  which  belongs  to  the  time  when  it  was 
possible  for  a  famine  to  rage  in  one  English  county 
whilst  there  was  a  glut  in  the  adjoining  one.  The 
Industrial  Freedom  League  is  an  inevitable  product 
of  that  situation.  It  is  true  that  the  Industrial 
Freedom  League  does  not  put  the  situation  frankly 
before  the  public,  because  the  moral  of  such  an 
elucidation  would  not  be  the  suppression  of  public 
enterprise  in  the  interest  of  private  enterprise,  but 
the  further  reform,  co-ordination,  and  extension  of 
local  government  with  a  view  to  enabling  it  to  deal 
with  large  districts.  This  is  the  last  thing  the  League 
desires,  because  its  one  valid  plea  against  the  muni- 
cipalities is  the  inadequacy  of  their  areas. 

Suppose,  for  instance,  Mr.  Emil  Garcke  were  to 
say,  "  The  Industrial  Freedom  League  does  not 
claim  Industrial  Freedom ;  it  protests  against  Indus- 
trial Bondage.  It  is  practically  a  committee  of  the 
commercial  electrical  enterprises  of  the  country  to 
protest  against  an  intolerable  state  of  things  in  which 
the  municipalities,  without  having  the  power  to 
develop  the  electrical  industry  fully  itself,  has  the 
power — and  uses  it — to  prevent  our  doing  it.  We 
are  ready  to  effect  a  revolution  in  English  industry 
by  establishing,  throughout  whole  provinces,  a  house- 
to-house  distribution  of  electrical  power  which  will 


Electrical  Difficulties  63 

enable  the  intelligent  individual  craftsman  to  com- 
pete once  more  with  the  brute  force  of  the  factory. 
We  are  ready  to  link  up  entire  manufacturing  dis- 
tricts with  networks  of  electric  trams  which  will 
enable  Englishmen  to  work  in  towns  whilst  their 
children  grow  up  in  the  country  instead  of  in  slums. 
But  we  are  stopped  by  the  municipalities.  This  one 
has  an  Electric  Lighting  Order  which  gives  it  a  vir- 
tual monopoly  within  its  own  ridiculous  limits  :  that 
one  will  not  allow  a  tramway  to  pass  down  its  main 
street  because  the  shopkeepers  consider  tramways 
vulgar.  We  represent  capital,  intelligence,  educa- 
tion, technical  knowledge,  scope  of  enterprise  and 
breadth  of  view  ;  and  we  are  stopped  at  every  turn 
by  the  narrowness,  the  ignorance,  the  timidity,  the 
jealousy,  the  poverty  of  a  series  of  little  gangs  of 
small  shopkeepers,  led  by  the  local  solicitor,  the 
local  auctioneer,  the  local  publican  and  the  local 
builder,  who  flourish  their  little  monopolies  and 
vetoes  in  our  faces,  and  are  determined  that  what 
was  good  enough  for  their  great-grandfathers  shall 
be  good  enough  for  the  modern  British  Empire." 

All  this  would  be  quite  true  enough  and  fair 
enough  for  all  purposes  of  commercial  controversy; 
but  the  remedy  is,  not  to  make  our  petty  local 
authorities  still  more  petty,  but  to  develop  our 
system  of  local  government  so  that  there  shall  be 
machinery  for  provincial  and  national  collectivism 
as  well  as  for  parochial  collectivism.  Such  a  con- 
clusion would  not  suit  the  anti-municipal  agitators: 


64  Municipal  Trading 

consequently  they  are  driven  to  obscure  the  issue 
by  attempting  to  revive  the  obsolete  doctrines  of 
the  laisser-faire  school,  and  to  disparage  municipal 
enterprise  by  those  comparisons  of  private  v^'ith 
public  balance-sheets  which,  as  we  have  seen,  are 
worthless  as  a  measure  of  advantage  to  the  rate- 
payer. 

None  the  less,  as  things  now  stand,  the  ratepayer 
has  a  real  grievance.  If  he  tries  to  establish  electric 
tramways  from  county  to  county,  or  to  reduce  the 
cost  of  electric  power  (still  ridiculously  expensive 
in  its  application  to  domestic  heating,  for  example) 
by  making  the  generating  centre  supply  a  whole 
province,  he  can  do  so  only  through  the  local 
authority  or  through  a  commercial  joint  stock  com- 
pany. If,  for  the  sake  of  cheap  service  and  public 
control,  he  tries  the  local  authority,  he  finds  that  its 
power,  like  that  of  the  witch  who  cannot  cross  running 
water,  stops  at  a  boundary  which  dates,  probably, 
from  the  Heptarchy.  If  he  submits  to  the  prices 
and  the  power  of  the  joint  stock  company,  he  finds 
that  the  local  authority  vetoes  the  tramway,  or  has 
a  virtual  monopoly  of  power  distribution  within  its 
own  area.     So  it  ends  in  his  going  without. 

The  reason  why  the  League,  which  would  be 
very  powerful  in  parliament  but  for  the  tight  hand 
kept  by  the  great  provincial  municipalities  on  their 
borough  members,  does  not  get  any  serious  grip  of 
the  electorate,  is  that  its  case  is  strong  only  where 
the  interest  of  the  ordinary  private  citizen  is  weak. 


Electrical  Difficulties  65 

The  grievance  of  being  hampered  in  the  exploita- 
tion of  a  whole  province,  is  the  grievance  of  a 
millionaire  or  of  a  Trust  controlled  by  a  group 
of  millionaires,  who  are  generally  assumed  to  be 
Americans.  The  hostility  of  the  average  municipal 
councillor  to  these  combinations,  though  it  is  a 
thoroughly  unenlightened  one,  reflects  that  of  the 
public  at  large.  The  municipal  areas  are  still  large 
enough  for  ordinary  trading  capitals  of  six  or  seven 
figures  ;  and,  as  we  have  seen,  the  case  for  muni- 
cipal trading  within  these  limits  is  overwhelming. 


VIII 

DIFFICULTIES   OF   MUNICIPAL 
TRADING  {continued) 

Housing 

A  LEADING  case  in  which  commercial  enterprise 
has  such  decisive  artificial,  legal  and  political  advan- 
tages over  municipal  enterprise  that  the  municipality 
cannot  compete  with  it,  is  the  great  building  in- 
dustry of  housing  the  population.  Compare,  for 
example,  a  municipal  housing  scheme  with  a  muni- 
cipal electric  lighting  scheme.  In  the  latter  the 
municipality  has  as  much  scope  within  its  own  area 
as  any  joint  stock  company.  It  can  light  the  palace 
of  an  ambassador,  the  show  rooms  of  a  universal 
provider,  the  benches  of  a  factory,  the  dining  room 
of  the  business  or  professional  man,  and  the  kitchen 
of  a  laborer.  In  short,  it  can  supply  everybody  in 
the  constituency.  But  in  housing  it  is  restricted  by 
law  to  insanitary  areas  and  to  workmen's  dwellings. 

66 


Housing  Difficulties  67 

The  London  County  Council  may  accept  as  a 
tenant  an  artisan  earning  from  thirty  shilHngs  a 
week  to  several  pounds;  but  a  struggling  journal- 
ist scraping  together  a  precarious  pound  a  week  is 
turned  from  its  doors.  A  private  builder  is  under 
no  such  restriction.  He  can  take  an  order  for  a 
cathedral  and  for  a  potting  shed,  for  a  millionaire's 
house  in  Park  Lane  and  for  the  cottage  of  the 
millionaire's  gamekeeper.  In  the  intervals  between 
large  contracts  he  can  keep  his  staff  and  plant  em- 
ployed on  small  ones.  If  he  decides  to  go  into  the 
business  of  the  housing  of  the  working  classes,  he 
can  proceed  much  more  cheaply  than  the  munici- 
pality. Instead  of  erecting  huge  blocks  of  dwellings 
with  fireproof  floors  and  all  the  solidities  and  sani- 
tary appliances  of  what  may  be  called  parliamentary 
building,  he  may  "  run  up  "  rows  of  small  private 
houses  which  will  presently  become  lodging  houses  ; 
or  he  may  adapt  the  family  mansions  of  a  neigh- 
borhood deserted  by  fashion  for  occupation  by 
working  class  families.  Under  these  conditions 
there  can  be  no  question  of  a  commercial  or  any 
other  test  :  comparison  is  impossible.  The  muni- 
cipality is  compelled  to  take  the  refuse  of  a  trade 
and  to  carry  it  on  in  the  most  expensive  way  :  the 
private  builder  has  the  pick  of  the  trade,  and  can 
adapt  his  expenditure  to  the  pecuniary  resources  ot 
the  tenant.  The  result  is  that  municipal  trading 
cannot  justify  itself  by  its  results  in  this  direction 
as  it  can  in  others,  especially  in  great  cities.  The 


68  Municipal  Trading 

buildings  may  seem  palatial  in  comparison  with  the 
slums  they  replace  ;  and  they  are  better  appointed 
and  not  more  barrack-like  than  many  of  the  piles 
of  flats  used  by  middle  class  people  ;  but  a  visit  to 
even  the  best  of  them  will  reveal  the  fact  that  the 
rents  are  too  high  for  the  wages  of  the  occupiers. 
A  flat  let  at  nine  shillings  a  week  to  a  man  earning 
twenty-four,  married  and  with  a  family,  solves  the 
housing  problem  for  him  in  a  highly  questionable 
manner.  It  makes  parasitic  labor  practically  com- 
pulsory for  his  wife  and  children.  In  fact  it  is  the 
value  of  the  County  Council  flat  as  a  testimonial 
of  respectability  to  the  woman  seeking  parasitic 
labor  that  makes  it  worth  the  man's  while  to  pay 
so  high  a  rent,  exactly  as  an  address  in  Park  Lane 
may  be  worth  a  huge  rent  to  a  man  whose  personal 
requirements  would  be  equally  satisfied  by  a  house 
in  Holloway  or  Peckham. 

In  passing,  it  may  be  said  here  that  the  views  of 
the  poor  as  to  how  to  make  the  most  of  the  family 
income  vary  more  strikingly  than  the  views  of  the 
rich.  The  laborer  or  humble  shop  assistant  who 
pays  nine  shillings  a  week  for  a  flat  of  two  or  three 
rooms  out  of  a  wage  of  twenty-four,  contrasts  with 
the  skilled  workman  who  earns  from  thirty  to  fifty 
shillings  a  week,  and  sometimes  more,  and  who 
nevertheless  lives  in  one  room,  never  troubles  him- 
self about  respectability,  and  spends  his  money  on 
"good  living,"  by  which  he  means  a  gluttonous 
Falstaffian  jollity.    He  and  his  family  are  hearty 


Housing  Difficulties  69 

eaters,  hearty  drinkers,  loud  laughers,  indefatigable 
excursionists,  noisy  neighbors,  and  prompt  strikers. 
And  it  is  not  easy  to  declare  with  any  conviction 
that  they  have  chosen  worse  than  the  people  who 
sacrifice  everything  to  a  craze  for  respectability, 
which  is  sometimes  almost  as  ruinous  as  a  craze  for 
drink.  For  the  twenty-four  shilling  votary  of  re- 
spectability is  a  very  mild  case.  Every  house-to- 
house  student  of  poverty  tells  us  of  single  women 
or  widows  with  wages  that  fluctuate  from  four  to 
ten  shillings,  or,  in  momentary  crises  of  prosperity, 
to  twelve  or  thirteen,  who  nevertheless  keep  their 
rooms  spotlessly  neat,  and  shiver  through  the  winter, 
fireless,  without  underclothing,  in  dresses  that  are 
superficially  decent,  while  in  the  same  house  slatterns 
live  disgracefully  on  four  times  their  income,  or 
Bardolph  and  Mrs.  Quickly  set  an  example  of  roar- 
ing, jovial  blackguardism.  Then  there  is  the  poor 
person  with  a  "  fancy,"  who  cannot  live  without  a 
horse,  or  a  dog,  or  a  bird,  or  flowers,  or  pigeons,  or 
some  musical  instrument,  things  apparently  as  wildly 
beyond  their  means  as  steam  yachts  and  motor  cars, 
which  they  yet  manage  to  procure  by  simply  sacri- 
ficing every  other  consideration  to  them,  as  beggar- 
misers  get  and  keep  bags  of  sovereigns  even  if  they 
have  to  eat  carrion  to  do  it.  We  are  apt  to  forget 
that  the  fancy  for  respectability  is  often  as  unintel- 
ligent and  thriftless  as  any  of  the  other  fancies.  We 
are  revolted  at  the  heartlessness  of  the  man  who 
starves  his  wife  to  provide  cutlets  for  his  pet  dog ; 


yo  Municipal  Trading 

but  we  applaud  the  widow  who  starves  her  children, 
physically  and  morally,  in  order  to  bring  them  up 
respectably  and  be  respectable  herself.  In  the  poor 
middle  class  this  is  a  crying  evil  :  boys  who  have 
the  making  of  strong  artisans  in  them  degenerate 
into  underfed  clerks  ;  numbers  of  wretched  little 
private-venture  schools  for  young  gentlemen  and 
ladies,  which  ought  to  be  suppressed  more  ruthlessly 
than  gambling  hells,  keep  children  out  of  the  Board 
schools  and  Polytechnics  ;  and  girls  grow  up  into 
shabby-genteel  "  ladies,"  whose  ignorance,  incom- 
petence, and  unsociability  defy  description.  But 
this  mania  for  respectability  does  not  disappear  at 
the  boundary  of  the  middle  class.  It  goes  down  to 
the  very  basement  of  society  ;  and  this  fact  has  an 
important  bearing  on  the  housing  problem,  because 
your  respectability  is  judged  by  the  street,  house  or 
room  you  live  in  just  as  much  in  the  slums  as  in  the 
squares.  And  the  tendency  in  all  classes  is  to  spend 
too  much  in  keeping  up  appearances.  However 
honorable  any  ambition  may  be  when  it  is  taken  in 
the  economic  order  of  its  real  importance,  it  may 
become  disastrous  when  it  is  taken  out  of  that  order. 
If  you  have  to  choose  between  underfeeding  your 
boy  and  patching  his  knickers,  patch  his  knickers. 
If  you  have  to  choose  between  underclothing  your 
daughter  comfortably  and  overclothing  her  present- 
ably,  underclothe  her  comfortably.  But  unfortun- 
ately underfeeding  and  underclothing  can  be  con- 
cealed ;    and    patching    and   overclothing    cannot. 


Housing  Difficulties  71 

And  so  the  order  in  which  they  are  taken  is  too 
often  the  opposite  of  the  economic  order.  In  the 
same  way  the  obvious  respectability  and  order  of 
the  County  Council  flat  at  three  shillings  a  room, 
however  great  an  advance  they  may  be  on  the 
poisonous  squalor  of  the  sewage  saturated  cellars  at 
four  and  sixpence  which  figure  in  the  report  of  the 
Royal  Commission  as  samples  of  the  results  of  pri- 
vate enterprise,  are  nevertheless  too  dear  in  a  city 
where  twenty-four  shillings  is  the  standard  municipal 
wage  for  laborers,  and  where  the  Imperial  Treasury, 
to  its  disgrace,  refuses  to  pay  even  that  modest 
figure. 

The  special  difficulty  in  housing  finance  is  the 
extraordinary  manner  in  which  the  question  of  cost 
price  is  complicated  by  the  phenomenon  of  economic 
rent,  that  rock  on  which  all  civilizations  ultimately 
split  and  founder.  In  a  municipal  electric  supply 
there  is  no  difficulty  about  cost  price,  because  a  unit 
in  Piccadilly  costs  no  more  than  a  unit  in  Putney. 
But  the  freehold  of  an  acre  of  space  for  dwelling 
purposes  costs  from  nothing  to  a  million  according 
to  its  situation.  To  convert  the  Mansion  House 
into  a  block  of  workmen's  dwellings  would  cost  the 
price  of  a  small  frontier  war  ;  but  the  Richmond 
Corporation  finds  it  within  its  resources  to  devote  a 
whole  road  to  workmen's  cottages  with  gardens  ; 
and  the  Richmond  Corporation  itself  envies  the  still 
greater  facility  with  which  municipal  cottages  are 
multiplied  in  Ireland.     If  a  municipality  owned  all 


72  Municipal  Trading 

the  land  within  its  jurisdiction,  it  would  still  have  to 
make  the  occupiers,  including  its  own  departments, 
pay  rent  in  proportion  to  the  commercial  or  resi- 
dential desirability  of  their  holdings  ;  but  it  could 
pool  the  total  rent  and  establish  a  "  moral  minimum" 
of  house  accommodation  at  a  "  fair  rent  "  on  a  per- 
fectly sound  economic  basis.  At  present  it  has  to 
throw  economics  to  the  winds  by  buying  land  at  its 
real  market  value,  and  charging  it  to  its  housing 
schemes  at  its  value  for  working  class  dwellings  (a 
pure  figment),  the  ratepayer  making  up  the  differ- 
ence between  this  and  the  real  marketvalue.  Having 
performed  this  conjuring  trick,  the  municipality 
generally  proceeds  to  pass  a  resolution  that  the 
dwellings  shall  be  let  at  rents  sufficient  to  prevent 
any  loss  coming  upon  the  ratepayers,  without  men- 
tioning that  they  have  already  borne  a  loss  which 
does  not  appear  in  the  housing  accounts.  Even  then, 
the  effect  of  the  resolution,  when  it  is  strictly  carried 
out,  is  to  put  the  rents  too  high  for  the  sake  of 
enabling  the  Borough  Treasurer  to  make  a  delusive 
demonstration  that  the  dwellings  are  paying  their 
way  commercially. 

Socially,  of  course,  they  may  pay  their  way  with 
a  handsome  profit.  It  is  true  that  they  are  seldom 
occupied  to  any  extent  worth  reckoning  by  the 
occupants  of  the  slums  which  have  been  demolished 
to  make  room  for  them.  They  are  taken  by  people 
who  are  on  the  verge  of  the  middle  class,  and  by 
the  respectable-at-any-price  poor.  But  these  people 


Housing  Difficulties  73 

are  shifted  up  from  private  lodgings  of  the  highest 
working  class  grade,  which,  being  left  vacant,  have 
to  be  relet  to  second  grade  tenants,  who  leave  their 
rooms  vacant  for  the  third,  and  so  on  to  the  lowest 
grade,  all  being  shifted  a  step  up.  But  the  trans- 
action is  very  slow  and  very  costly.  Each  scheme 
is  entered  upon  to  meet  a  particular  local  emer- 
gency ;  and  long  before  the  years  of  preHminary 
red  tape  are  worried  through,  the  emergency  has 
been  settled  by  the  brute  force  of  necessity  ;  and 
though  new  emergencies  have  arisen,  the  old  scheme 
is  more  or  less  a  misfit  for  them  :  indeed  it  may 
have  become  apparent  that  the  right  cure  is  not  a 
local  housing  scheme  but  a  locomotion  and  country 
housing  scheme. 

On  the  whole,  though  municipal  housing  is 
popular  because  "  there  is  something  to  shew  for 
the  money,"  and  because  it  deals  with  a  notorious 
and  frightful  evil,  its  opponents  can  always  easily 
demonstrate  that  in  city  centres  at  least  the  schemes 
are  commercially  hopeless,  and  that  though  the  rents 
are  too  high  for  the  incomes  of  the  tenants  they 
are  yet  so  low  relatively  to  the  real  site  value  that 
the  tenants  are  virtually  receiving  a  grant  in  aid  of 
their  wages  at  the  expense  of  their  fellow  citizens, 
which  grant  is  exploited  by  the  parasitic  trades  in 
the  manner  explained  in  Chapter  IV. 

It  should  not  be  forgotten  that  the  housing 
question  is  not  one  of  building  only  :  it  is  also  one 
of  demolition.  Houses  do  not  last  for  ever  ;  and 

D  2 


74  Municipal  Trading 

we  have  not  yet  settled  the  best  Hfetimc  for  the 
builder  to  aim  at.  Building  "  great  bases  for  eter- 
nity "  may  be  the  work  of  a  cathedral  builder  ;  but 
as  far  as  ordinary  dwelling  houses  are  concerned, 
there  is  a  growing  opinion  that  living  in  the  same 
house  all  your  life  and  then  leaving  it  to  your  chil- 
dren is  as  unwholesome  as  wearing  the  same  sheep- 
skin and  handing  it  also  on  to  posterity.  It  may  be 
that  the  municipal  by-laws  of  the  future  will  in- 
clude a  prohibition  of  the  use  of  a  dwelling  house 
for  longer  than  twenty  years.  In  any  case  it  is  clear 
that  a  good  deal  of  XIX  century  building  will  prove 
very  shortlived,  and  that  the  rows  of  cheap  houses 
built  for  clerks  and  artisans  on  the  sites  of  the  sub- 
urban parks  and  country  houses  of  50  years  ago 
will  presently  begin  to  figure  as  "  condemned 
areas "  on  our  municipal  agenda  papers.  Besides 
the  decay  of  the  jerry-built  brick  box,  we  shall  have 
to  face  the  obsolescence  of  the  solidly  built  "model" 
or  municipal  tenement  block.  These  places  seem  at 
first  so  enormously  superior  to  the  filthy  rookeries 
they  replace  that  their  revolting  ugliness,  their 
asphalted  yards  with  the  sunlight  shut  out  by  giant 
cliffs  of  brick  and  mortar,  their  flights  upon  flights 
of  stony  steps  between  the  street  and  the  unfor- 
tunate women  and  children  on  the  upper  floors, 
their  quaint  plan  of  relieving  a  crowd  on  the  floor 
by  stacking  the  people  on  shelves,  are  overlooked 
for  the  moment  ;  but  long  before  they  become  un- 
inhabitable from  decay  they  will  become  as  repug- 


Housing  Difficulties  75 

nant  as  the  warrens  they  have  supplanted.  In  short, 
the  municipalities  of  the  future  will  be  almost  as 
active  in  knocking  our  towns  down  as  in  building 
them  up. 

At  present  the  demolition  problem  has  been  so 
little  thought  out  that  the  law  gravely  enacts  that 
the  municipality  must  rehouse  all  the  people  it  dis- 
places by  demolishing  a  rookery.  As  a  rookery  is 
always  so  outrageously  overcrowded  that  not  even 
by  replacing  two-storey  houses  by  dwellings  built 
up  to  the  extreme  limit  allowed  by  the  Building 
Acts  is  it  possible  to  rehouse  the  tenants  on  the 
same  site,  the  municipality  has  either  to  let  the 
rookery  alone  or  acquire  extra  land  for  rehousing. 
Now  this  is  not  always  possible  without  fresh 
displacements.  The  whole  district  may  be  over- 
crowded; and  in  that  case  the  only  remedy  is  for 
the  excessive  people  to  go  elsewhere  ;  and  this,  of 
course,  raises  the  insoluble  question  as  to  which 
persons  are  excessive.  In  practice  what  happens  is 
that  the  letter  of  the  law  is  admitted  to  be  im- 
practicable ;  and  the  municipality  bargains  with  the 
Local  Government  Board  as  to  how  many  people 
it  must  rehouse.  It  offers  to  rehouse  a  third  ;  the 
Board  demands  two  thirds ;  and  after  much  chaffer- 
ing what  is  possible  under  all  the  circumstances  is 
done. 

If  the  obligation  to  rehouse  were  imposed  on 
private  and  municipal  enterprise  alike,  municipal 
housing  would  be  at  no  disadvantage  on  this  point. 


76  Municipal  Trading 

But  commercial  enterprise  is  practically  exempt 
from  such  social  obligations.  Within  recent  years 
Chelsea  has  been  transfigured  by  the  building  opera- 
tions of  Lord  Cadogan.  Hundreds  of  acres  of  poor 
dwellings  have  been  demolished  and  replaced  by 
fashionable  streets  and  "  gardens."  The  poHtics  of 
Chelsea,  once  turbulently  Radical,  are  now  effusively 
Conservative.  The  sites  voluntarily  set  aside  by 
Lord  Cadogan  for  working  class  dwellings  on  un- 
commercial principles  of  public  spirit  and  personal 
honor  have  not  undone  the  inevitable  effects  of  the 
transfiguration  of  the  whole  neighborhood.  The 
displaced  have  solved  the  rehousing  problem  by 
crossing  the  river  into  Battersea.  Thus  Lord  Cado- 
gan is  more  powerful  than  the  Chelsea  Borough 
Council.  He  can  drive  the  poorer  inhabitants  out 
of  the  borough  :  the  Council  cannot.  He  can  re- 
place them  with  rich  inhabitants :  the  Council  can- 
not. He  can  build  what  kind  of  house  pays  him 
best,  mansion,  shop,  stable  or  pile  of  flats  :  the 
Council  cannot.  Under  such  circumstances  com- 
parison between  the  results  of  his  enterprise  and  the 
Council's  is  idle.  The  remedy  is  either  to  curtail 
Lord  Cadogan's  freedom  until  it  is  no  greater  than 
the  Council's,  or  else  make  the  Council  as  free  as 
Lord  Cadogan.  As  the  former  alternative  would 
end  in  nothing  being  done  at  all,  and  rendering  im- 
possible such  great  improvements  as  have  been  made 
both  in  Chelsea  and  Battersea  by  Lord  Cadogan's 
enterprise,  the  second  alternative — that  of  untying 


Housing  Difficulties  77 

the  hands  of  the  ratepayer — is  obviously  the  sensible 
one. 

The  obligation  to  rehouse  is  imposed  on  rail- 
way companies  and  other  enterprises  which  have 
to  obtain  parliamentary  powers.  But  they  evade 
the  obligation  to  a  great  extent  by  privately  acquir- 
ing the  house  property  they  need,  and  evicting  the 
tenants  before  they  clear  the  area ;  so  that  when 
the  hour  for  demolition  comes  there  is  nobody  to 
be  rehoused.  This  is  the  explanation  of  the  furious 
intensity  of  local  feeling  against  the  railway  com- 
panies. The  people  driven  off  the  areas  cleared  by 
them  overcrowd  the  surrounding  neighborhood ; 
and  many  small  shopkeepers  who  are  not  them- 
selves disturbed  are  ruined  by  the  removal  of  their 
customers.  There  is  no  compensation  and  little 
rehousing.  But  this  local  unpopularity,  to  which 
the  railway  company  is  indifferent,  could  not  be 
defied  by  the  local  authority.  It  may  acquire  land 
for  the  future  extension  of  its  electric  lighting  works 
or  the  like ;  and  in  gradually  clearing  this  land  it 
no  doubt  takes  care  to  deal  with  a  few  houses  at  a 
time  in  order  to  avoid  the  obligation  to  rehouse 
which  becomes  operative  when  ten  houses  are  dealt 
with  at  one  stroke ;  but  even  in  this  it  has  to  pro- 
ceed with  a  constant  care  to  avoid  "hardshipping" 
its  constituents,  whereas  a  commercial  company  will 
spread  disaster  through  a  whole  ward  without  the 
least  consciousness  of  what  it  is  doing.  This  is  only 
a  striking  instance  of  the  inconvenience  and  suffer- 


78  Municipal  Trading 

ing  which  the  movements  of  commercial  enterprise 
cause  daily  in  crowded  communities  because  they 
are  wholly  unconcerted.  Municipal  civilization  is 
nothing  but  a  struggle  to  get  the  operations  of 
civic  life  better  concerted.  Meanwhile,  the  fact  that 
the  commercial  speculator  can  with  impunity  be 
inconsiderate  to  a  degree  that  would  cost  every 
municipal  councillor  his  seat  at  the  next  election 
must  be  constantly  borne  in  mind  in  any  com- 
parison of  private  with  municipal  enterprise. 

Finally  it  must  be  admitted  that  until  the  muni- 
cipality owns  all  the  land  within  its  boundaries,  and 
is  as  free  to  deal  with  it  and  build  upon  it  as  our 
ground  landlords  are  at  present,  the  problem  of 
housing  cannot  be  satisfactorily  solved. 


IX 

THE  MUNICIPAL  AUDIT 

There  arc  certain  diiFercnccs  between  the  legal 
conditions  of  communal  and  commercial  finance 
which  must  be  taken  into  account  in  comparing 
them.  These  differences  are  mentioned  here  because, 
however  wholesome  they  may  be  in  the  long  run 
for  municipal  enterprise,  they  sometimes  handicap 
it  at  the  start. 

A  private  company  docs  not  pay  interest  on  its 
capital  until  its  capital  actually  earns  the  interest. 
Nobody  expects  this  to  happen  at  once ;  and  some- 
times it  does  not  happen  at  all.  In  any  case  the 
company  treats  its  capital  as  a  property  to  be  held 
for  ever.  A  municipality  has  to  pay  interest  from 
the  day  the  capital  is  borrowed ;  and  it  must  not 
only  treat  that  capital  as  a  debt  to  be  paid  off,  but 
the  paying  off  must  begin  at  once,  concurrently 
with  the  interest.  It  is  thus  compelled  to  bequeath 
to  posterity  a  freehold  property  and  goodwill  for 

79 


8o  Municipal  Trading 

which  it  has  had  to  pay  handsomely ;  and  the  result 
is  that  the  Irishman's  jesting  question  as  to  what 
posterity  had  done  for  him  that  he  should  do  any- 
thing for  posterity,  is  becoming  a  serious  question 
in  the  mouths  of  English  ratepayers.  The  rough 
and  ready  reply  that  though  the  individual  dies  the 
community  is  immortal,  and  its  life  must  be  treated 
as  infinitely  continuous,  is  plausible ;  but  even  an 
immortal  individual  would  starve  if  he  invested  all 
his  income  and  spent  none  of  it;  and  a  community 
can  sacrifice  the  present  to  the  future  in  the  same 
way.  For  instance,  the  immortality  of  the  nation 
would  not  justify  a  Chancellor  of  the  Exchequer 
in  attempting  to  pay  off  the  national  debt  in  one 
year.  If  commercial  traders  and  joint  stock  com- 
panies could  set  up  industrial  plant  only  on  condi- 
tion that  they  must  form  a  sinking  fund  to  pay  off 
its  cost  within  a  period  not  greater  than  its  lifetime, 
and  often  considerably  less,  the  outcry  would  be 
heartrending ;  and  the  newspapers  would  be  filled 
with  demonstrations  of  the  impossibility  of  trading 
on  such  terms. 

Something  of  the  kind  is  actually  done  at  pre- 
sent when  a  concession  is  given  to  a  private  tram- 
way company  on  condition  that  at  the  expiration  of 
a  term  of  years  it  shall  hand  over  its  lines  to  the 
municipality  for  their  market  value  as  scrap  iron. 
But  the  difficulty  about  such  contracts  as  these  is 
that  the  courts  will  not  enforce  them.  To  a  states- 
man or  a  socialist  it  is  just  as  reasonable  to  compel 


The  Municipal  Audit  8 1 

a  private  company  to  buy  itself  out  within  a  fixed 
period — for  that  is  what  such  a  condition  comes  to 
— as  to  place  the  same  obligation  on  a  municipality. 
Both  have  to  make  a  present  to  posterity  if  any- 
thing is  left  at  the  expiry  of  the  term.  But  there  is 
nothing  unprecedented  in  this.  The  inventor  has  to 
present  his  invention  to  posterity  at  the  end  of 
fourteen  years,  and  the  author  his  book  at  the  end 
of  forty-two  years,  or  seven  years  after  his  death  ; 
whilst  the  London  shopkeeper  has  to  present  his 
goodwill  to  his  landlord  at  the  end  of  his  lease. 
And  yet  the  same  judge  who  will  enforce  the  con- 
sequences of  the  expiry  of  a  patent  or  copyright, 
and  of  the  falling  in  of  a  lease,  as  if  they  were  the 
most  obviously  natural  and  proper  of  arrangements, 
will  refuse  to  enforce  the  scrap  iron  clause  against 
a  tramway  company  on  the  ground  that  it  is  incon- 
ceivable that  Parliament  could  have  contemplated 
anything  so  monstrous  as  its  Act  seems  to  imply. 
The  result  is  that  whereas  a  municipality  is  always 
held  rigidly  to  its  bargain,  a  commercial  company 
can  defy  even  an  Act  of  Parliament  if  it  is  careful 
to  conciliate  all  private  opposition  and  attack  no- 
thing but  the  interests  of  the  community.  It  is 
true  that  Acts  of  this  description  have  sometimes 
driven  too  hard  a  bargain,  as  the  electrical  lighting 
companies  succeeded  in  shewing  when  the  term  was 
lengthened  from  twenty-one  to  forty-two  years. 
But  municipal  trade  has  suffered  in  the  same  way, 
many  municipal  projects  having  been  abandoned 


82  Municipal  Trading 

or  postponed  because  the  term  of  repayment  was 
too  short. 

In  everyday  practice,  it  is  not  so  much  the  judge 
as  the  official  auditor  who  is  to  be  feared  by  the 
municipalities.  It  is  not  at  present  at  all  difficult 
to  find  a  barrister  who  is  thoroughly  disaffected  to 
municipal  trading.  If  such  a  one  were  appointed  by 
the  Local  Government  Board  to  audit  the  accounts 
of  a  County  Council,  a  London  Borough  Council, 
or  an  Urban  District  Council,^  he  might,  on  the 
very  plausible  ground  of  keeping  it  up  to  the  mark 
commercially,  insist  on  allowances  for  deprecia- 
tion which,  as  the  actual  wear  and  tear  is  in 
practice  made  good  out  of  revenue,  and  a  reserve 
fund  is  maintained  to  replace  scrapped  machinery, 
might  virtually  load  the  enterprise  with  a  second 
sinking  fund,  and  enable  the  opponents  of  muni- 
cipal trading  to  point  to  commercial  companies 
which  (having  no  sinking  fund  at  all)  could  shew 
more  economical  and  businesslike  figures.  On  the 
other  hand,  if  the  auditor  has  not  a  formidable 
power  of  public  criticism,  the  struggle  which  goes 
on  in  a  local  authority  between  the  electric  lighting 
committee  in  its  efforts  to  hold  over  its  profits 
under  the  head  of  reserve  fund,  and  the  rest  of  the 
council  in  its  desire  to  distribute  the  profits  among 
the  ratepayers  in  the  form  of  the  always  popular 

1  Municipal  Corporations  (except  Tunbridge  Wells,  Bournemouth, 
and  Southend-on-Sea)  are  not  subject  to  the  L.G.B.  audit.  The  rate- 
payers elect  two  auditors  and  the  Mayor  nominates  a  third.  In  other 
words,  the  Municipal  Corporations  are  not  audited  at  all. 


The  Municipal  Audit  83 

contribution  in  aid  of  the  rates,  may  lead  to  the 
pillaging  of  the  reserve  fund  for  electioneering 
purposes,  and  even  to  such  depreciation  of  plant 
as  used  to  occur  in  the  early  days  of  continental 
State  railways,  when  impecunious  finance  ministers 
swept  the  railway  fares  into  the  treasury  and  allowed 
the  rolling  stock,  the  permanent  way,  and  the 
stations  to  decay.  And  yet  if  the  auditor  be  em- 
powered to  dictate  the  financial  management  in- 
stead of  simply  to  criticize  it  and  check  the  items, 
he  might  discredit  the  most  beneficial  public  enter- 
prises by  "  simply  looking  at  them  as  a  man  of 
business."  He  could  not  very  well  insist  on  street 
paving  being  put  *'  on  a  sound  business  footing  " 
by  means  of  turnpikes  and  tolls  which  would  make 
municipal  paving  "  pay  "  ;  but  he  might,  without 
shocking  public  opinion,  insist  on  commercially 
profitable  charges  for  water  and  light  in  addition 
to  a  double  sinking  fund  (a  double  present  to  pos- 
terity) and  thus  enable  the  Industrial  Freedom 
League  to  prove  by  figures  that  communal  enter- 
prise is  less  economical  than  commercial  enterprise. 
These  possibilities  are  by  no  means  fantastic. 
The  report  of  the  Commission  on  Municipal 
Trading  (Blue  Book  No.  270,  23rd  July  1903, 
4s.)  contains  several  sensible  suggestions  as  to  the 
auditing  of  municipal  accounts  ;  but  as  the  recom- 
mendation "  that  the  auditor  should  certify  that 
separate  accounts  of  all  trading  undertakings  have 
been  kept,  and  that  every  charge  that  each  ought 


84  Municipal  Trading 

to  bear  has  been  duly  debited  "  is  not  balanced  by 
any  consideration  of  the  invisible  credits  of  munici- 
pal trade,  it  may  be  inferred  that  parliament  is  still 
disposed  to  apply  the  commercial  test  to  communal 
enterprise  ;  and  it  is  not  the  business  of  the  Local 
Government  Board  to  be  more  enlightened  than 
parliament,  though  the  Board  is  no  doubt  more  ex- 
posed to  the  brute  force  of  fact,  which  soon  brings 
the  most  hardened  commercial  doctrinaires  to  their 
senses  in  the  fairly  obvious  cases.  The  very  munici- 
palities themselves  are  dominated  by  the  com- 
mercial view,  and  often  encourage  themselves  rather 
childishly,  keeping  their  accounts  in  such  a  way  as 
to  produce  the  utmost  possible  appearance  of  com- 
mercial prosperity  by  throwing  as  much  as  possible 
of  the  expenses  on  the  general  rate  whilst  crediting 
the  receipts  of  each  municipal  service  to  its  special 
department.  There  is,  in  fact,  for  the  moment  a 
serious  menace  to  municipal  enterprise  in  the  cry 
for  commercial  auditing. 

Fortunately,  the  demand  is  not  a  permanently 
practicable  one.  Experience  soon  reduces  com- 
mercial auditing  to  absurdity  when  it  is  applied  to 
municipal  business,  quite  as  much  because  it  is  too 
tolerant  in  some  directions  as  because  it  is  too 
exacting  in  others.  Municipal  auditing  is  techni- 
cally a  distinct  branch  not  only  of  accountancy  but 
of  law  ;  and  it  is  no  more  the  business  of  the 
ordinary  accountant  or  barrister  than  pleading 
points  of  international  law  before  the  judicial  com- 


The  Municipal  Audit  85 

mittee  of  the  Privy  Council  is  the  business  of  the 
ordinary  Old  Bailey  practitioner.  It  will  finally 
develop  as  a  practically  separate  profession  ;  and  it 
is  only  in  the  meantime  that  we  need  be  on  our 
guard  against  the  vulgar  cry  for  treating  a  municipal 
enterprise  like  any  other  business,  on  sound  business 
lines  etc.,  etc.,  etc. 

The  most  commercially  obsessed  auditor,  when 
he  first  touches  municipal  trade,  is  brought  up 
standing  by  the  novel  fact  that  the  duty  of  the 
municipality  is  to  make  as  little  profit  as  possible, 
whereas  the  duty  of  the  commercial  company  is  to 
make  as  much  profit  as  possible.  An  electric  light- 
ing company  paying  a  dividend  of  lo  per  cent  is  a 
triumph  of  good  management  :  a  municipal  electric 
ligl.'.ting  committee  making  profits  at  the  same  rate 
is  guilty  of  social  malversation,  which  the  auditor 
should  at  once  expose  and  challenge. 

To  understand  this,  the  ratepayer  must  imagine 
himself  in  the  position  (if  he  does  not  already 
actually  occupy  it)  of  a  consumer  of  municipal 
electric  light.  He  pays  at  the  usual  commercial 
rate :  say  6d.  to  2d.  per  unit.  At  the  end  of  the 
financial  year  he  learns  that  the  profit  on  municipal 
lighting  has  been  so  great  that  the  electric  lighting 
committee  has  been  able  to  hand  over  a  sum  in 
aid  of  the  general  rate  which  reduces  it  by  a  penny 
in  the  pound.  Is  he  gratified  by  the  intelligence  : 
Not  at  all  :  he  indignantly  demands  what  the 
municipality  means  by  overcharging  him  for  current 


86  Municipal  Trading 

in  order  to  relieve  the  rates  of  his  neighbors  who 
burn  gas  or  oil.  And  his  protest  is  perfectly 
justified.  The  object  of  municipal  trading  is  not 
relief  of  the  rates :  if  it  were,  it  might  be  manipulated 
so  as  to  throw  the  entire  burden  of  local  taxation 
on  certain  classes  of  consumers  exactly  as  the  entire 
burden  of  local  taxation  in  Monaco  is  thrown  on 
the  gamblers  of  Monte  Carlo.  Its  object  is  to 
provide  public  services  at  cost  price.  This  cost  price, 
to  make  the  service  really  economical  in  the  wide 
sense  of  good  municipal  statesmanship,  may  include 
higher  wages  to  unskilled  labor  than  a  private  com- 
pany would  pay,  and  it  of  course  includes  interest 
on  the  capital  raised  by  the  general  body  of  rate- 
payers. To  this  a  cunning  municipality  will  perhaps 
add  some  little  bribe  to  the  general  ratepayer  lest, 
when  not  expecting  to  be  himself  a  consumer,  he 
should  refuse  to  trouble  himself  about  the  service, 
and  vote  for  an  avowed  opponent  of  it.  It  will  even 
retain  a  little  profit  to  encourage  itself ;  for  the 
commercial  habit  is  strong  in  the  average  councillor. 
But  more  than  this  the  municipality  has  no  right  to 
charge  except  with  the  deliberate  purpose  of  re- 
adjusting the  burden  of  the  rates  by  an  obviously 
abusable  method  which  should  be  challenged  by 
a  good  auditor.  The  reckless  way  in  which 
municipal  trading  is  often  recommended  from  the 
platform  as  a  means  of  relieving  the  rates  shews 
that  some  of  its  popular  advocates  understand  it 
as  little  as  its  popular  opponents  ;  but  the  question 


The  Municipal  Audit  87 

comes  up  sharply  enough  in  practice  on  the 
municipalities  ;  and  charges  are  kept  as  near  to 
cost  as  is  compatible  with  the  excessive  caution 
which  characterizes  municipal  enterprise.  This  is 
done,  not  on  principle,  but  because  of  the  curious 
jealousies  which  exist  between  municipal  com- 
mittees, and  between  each  committee  and  the  whole 
council.  Thus,  when  the  electric  lighting  com- 
mittee makes  a  profit  it  tries  to  keep  it  by  credit- 
ing it  to  the  reserve  fund.  A  proposal  to  apply  it 
to  the  reduction  of  the  rates  usually  comes  from 
the  Finance  and  Rating  Committee  in  the  form 
of  an  amendment  to  the  Electricity  Committee's 
report.  Furious  hostility  between  the  committees 
ensues ;  and  if  the  amendment  is  carried,  the 
Electricity  Committee  considers  that  the  Finance 
Committee  has  plundered  it,  and  takes  care,  next 
time,  to  reduce  the  price  of  current  to  the  consumer 
so  that  there  shall  be  no  profits  to  be  seized 
upon. 

Thus  the  theoretically  right  course  is  taken 
even  when  the  councillors  do  not  understand  the 
theory  ;  and  the  practice  is  to  avoid  profits  by 
keeping  prices  down  to  cost.  The  absence  of 
profits  is,  in  fact,  a  proof  of  the  proper  conduct 
of  the  enterprise.  Such  absence  in  a  commercial 
company  would  be  a  proof  of  incompetence.  An 
auditor  therefore  has  to  apply  precisely  opposite 
tests  to  municipal  and  commercial  undertakings. 
His  view   of  a   commercial  company  is   that   the 


88  Municipal  Trading 

larger  the  profits,  the  sounder  the  undertaking. 
His  view  of  a  municipal  supply  is  that  the  less  the 
profit,  the  honester  the  finance  of  the  borough. 
Above  all,  if  he  is  to  certify,  as  the  Committee 
on  Municipal  Trading  recommends,  "  that  in  his 
opinion  the  accounts  present  a  true  and  correct  [sic] 
view  of  the  transactions  and  results  of  trading  for 
the  period  under  investigation  "  he  must  estimate 
not  only  the  appropriated  profits  which  would  go 
to  commercial  shareholders  as  dividend,  but  the 
total  social  utility  of  the  enterprise  during  the  year 
to  the  ratepayers.  And  this  is  a  sort  of  accounting 
which  neither  the  Institute  of  Chartered  Account- 
ants nor  the  Incorporated  Society  of  Accountants 
and  Auditors  yet  profess- 


X 

THE  MUNICIPAL   REVENUE 

One  of  the  keenest  grievances  of  the  commercial 
man  who  sees  profitable  branches  of  his  own  trade 
undertaken  by  the  municipaHty  is  that  it  is  com- 
peting against  him  "  with  his  own  money,"  meaning 
that  it  forces  him  to  pay  rates,  and  then  uses  the 
rates  to  ruin  him  in  his  business.  The  effective 
platform  reply  to  this  is  that  the  profitable  muni- 
cipal trades,  far  from  costing  the  ratepayers  anything, 
actually  lighten  their  burden.  The  commercially 
unprofitable  trades  are  left  to  the  municipality  with- 
out demur.  The  trades  by  which  private  contractors 
make  profit  and  the  municipality  none,  are,  as  we 
have  seen,  mostly  sweated  or  parasitic  trades  which 
in  the  long  run  add  heavily  to  the  ratepayer's  public 
and  private  burdens. 

But  in  any  case  the  alleged  grievance  is  far 
stronger  as  against  commercial  than  as  against  com- 
munal competition.  The  private  tradesman  has  to 


90  Municipal  Trading 

pay  rent  and  interest  as  well  as  rates.  Rent  is  the 
great  original  fund  from  which  industrial  capital  is 
saved  ;  and  interest  on  that  capital  eventually  forms 
a  second  capital  fund  of  equal  or  greater  magnitude ; 
so  that  when  a  shopkeeper  finds  his  business  captured 
by  a  huge  joint  stock  universal  provider,  he  is  being 
competed  against  "  with  his  own  money,"  paid  by 
him  to  his  landlord  or  to  the  capitalist  from  whom 
his  capital  is  borrowed,  just  as  much  as  when  the 
new  competitor  is  a  municipality. 

Nothing  shows  the  economic  superficiality  and 
political  ignorance  of  the  ordinary  citizen  more  than 
the  fact  that  he  submits  without  aword  to  the  private 
appropriation  of  large  portions  of  the  proceeds  of 
his  business  as  rent  by  private  landholders,  whilst 
he  protests  furiously  against  every  penny  in  the 
pound  collected  from  him  by  the  municipality  for 
his  own  benefit.  The  explanation  probably  is  that 
in  signing  his  lease  he  has  explicitly  accepted  the 
rent  as  inevitable,  and  at  least  has  his  house  or  shop 
to  shew  for  it  ;  whereas  the  rate  collector  strikes 
him  as  a  predatory  person  who  makes  him  pay  for 
streets  and  lamps,  schools  and  police  stations,  in 
which  he  has  no  sense  of  property. 

Still,  in  dismissing  the  usual  grievances  on  this 
subject  as  unreasonable,  it  must  not  be  assumed  that 
rating  is  a  satisfactory  method  of  raising  revenue. 
A  rate  is  simply  a  tax  on  houses  :  that  is,  a  tax  on 
an  article  of  prime  necessity.  If  it  were  shifted  to 
bread  there  would  be  an  overwhelming  outcry  about 


The  Municipal  Revenue        91 

taxing  the  bread  of  the  poor  ;  and  yet  the  poor 
suffer  more  from  want  of  house  room  than  from 
want  of  bread.  What  is  more,  the  poor,  under  pres- 
sure, can  contract  their  requirements  of  house  room 
in  the  most  disastrouslyunhealthy  way.  Eight  people 
cannot  live  on  a  single  ration  of  bread  ;  but  they 
can  sleep  in  one  room,  and  even  take  in  a  lodger. 

We  are  all  in  the  habit  of  estimating  a  man's 
means  by  the  value  of  the  house  he  lives  in.  Shop- 
keepers give  credit  to  a  good  address  much  more 
readily  than  to  a  good  man.  The  Income  Tax  Sur- 
veyor, making  a  guess  at  the  income  of  an  actor  or 
journalist  or  artist,  assesses  his  address,  and  can  be 
brought  down  promptly  by  the  modest  admission, 
*'  I  have  only  two  rooms  on  the  second  floor." 
But  scientific  precision  cannot  be  claimed  for  this 
method.  A  man  living  in  a  house  worth  ^150  a 
year  is  pretty  sure  to  be  a  well-to-do  man  if  he  uses 
the  whole  house  as  his  private  residence  ;  but  many 
people  pay  that  rent  in  order  to  carry  on  the  busi- 
ness of  lodging-house  keepers,  in  which  case  they 
live  in  the  basement  and  the  attics,  and  would  not 
dream  of  taking  a  house  for  their  own  use  at  so 
high  a  rent  as  a  third  of  that  sum.  The  differences 
between  business  premises  are  as  great  as  the  differ- 
ences between  business  and  private  premises.  A 
single  small  room  in  Bond  Street  will  accommodate 
a  fashionable  palmist  who  may  be  making  a  consider- 
able income.  Next  door  a  manufacturer  of  motor 
cars,  requiring  a  hundred  times  as  much  space,  may 


92  Municipal  Trading 

be  making  no  profits  at  all.  In  cheaper  neighbor- 
hoods, the  same  contrast  may  occur  between  a  watch- 
maker and  a  jobmaster  or  furniture  remover.  On 
the  whole,  there  is  very  little  to  be  said  for  our 
rating  system  as  an  index  of  what  each  individual 
ratepayer  can  afford  to  pay. 

The  only  thing  to  be  said  for  the  system  is  that 
it  is  a  rough  way  of  taxing  rent,  since,  theoretic- 
ally, the  rate  falls  on  the  landlord.  It  does  so 
in  fact  as  well  as  in  theory  when  the  tenant  is 
rackrented  to  the  last  farthing  ;  but  then  very  few 
ratepaying  tenants  are  so  rackrented.  If  the  tenant 
would  at  a  pinch  pay  another  ^2  a  year,  say,  sooner 
than  move  (a  pretty  common  case,  one  guesses),  he 
is  from  the  economists'  point  of  view  enjoying  £i 
a  year  of  the  rent ;  and  if  his  rates  go  up  by  ^2  he 
will  not  be  able  to  shift  the  increase  on  to  his  land- 
lord :  all  that  will  happen  is  that  his  rent  will  become 
a  rackrent  instead  of  falling  _^2  short  of  it.  The  rate 
collector  takes  what  the  landlord  spared.  Thus  the 
increase  in  local  rates  which  has  taken  place  of  late 
years  must  to  a  great  extent  have  fallen  on  the  rate- 
paying  tenants  instead  of  on  the  landlords ;  and  this 
explains  why  the  tenants  resist  the  rates  so  strenu- 
ously in  spite  of  all  abstract  economic  demonstrations 
that  it  is  the  landlord  who  pays  in  the  long  run. 

The  popular  remedy  is  to  rate  site  values  directly, 
collecting  from  the  tenant  as  usual,  but  empowering 
him  to  deduct  from  his  rent  ad  valorem.  Thus  if 
the  rate  be  a  shilling  in  the  pound  on  the  site  value, 


The  Municipal  Revenue        93 

a  shilling  is  deducted  by  the  occupier  from  every 
pound  he  pays  the  leaseholder,  and  by  the  leaseholder 
from  every  pound  he  pays  the  ground  landlord. 

There  is  nothing  impracticable  or  incomprehen- 
sible in  this.  The  real  objection  to  it,  as  Voltaire 
pointed  out  150  years  ago  in  "  L'Homme  aux 
Quarante  Ecus,"  is  that  it  throws  the  whole  weight 
of  local  taxation  on  the  proprietor  of  land,  the  most 
responsible  and  active  sort  of  proprietor,  and  ex- 
empts the  people  who  do  nothing  but  order  their 
banker  to  cash  their  dividend  warrants  and  cut  ofF 
their  coupons  for  them.  A  landlord  has  to  look 
after  his  property  :  in  fact,  some  of  the  strongest 
arguments  in  favor  of  municipalization  of  land  are 
drawn  from  a  comparison  of  the  handsome  work 
done  by  great  landlords  in  developing  towns  and 
districts,  with  the  meaner  results  of  petty  proprietor- 
ship. The  landlord,  far  from^  being  the  worst  sort 
of  proprietor,  is  the  best.  The  admitted  objec- 
tion to  property  as  an  institution  is  that  it  in- 
evitably creates  an  idle  class  of  rich  people.  But 
in  England  this  was  faced  cheerfully  enough  as  long 
as  property  meant  property  in  land,  because  even 
the  most  complete  emancipation  of  the  landlord 
from  feudal  duties  left  him  still  personally  re- 
sponsible for  the  prosperity  of  his  estate  ;  and 
when  he  neglected  or  mismanaged  it  (as  no  doubt 
he  often  did)  at  least  he  finally  impoverished  him- 
self as  well  as  others.  It  was  not  until  the  industrial 
revolution  of  the  XVIII   and  XIX  centuries  de- 


94  Municipal  Trading 

veloped  the  joint  stock  system,  that  our  manufac- 
tures began  to  throw  vast  quantities  of  money  into 
the  hands  of  shareholders  who  were  completely  cut 
off  from  the  management  of  their  property,  and 
whose  children  grew  up  with  the  purse  of  Fortun- 
atus  and  without  exercising  personal  supervision  or 
bearing  personal  responsibility  of  any  kind  in  return 
for  it.  This  is  the  explanation  of  the  apparently 
anomalous  incidence  of  the  Income  Tax,  which,  by 
sparing  the  poor  and  striking  at  the  rich,  recognizes 
the  fact  that  personal  industry  is  often  in  inverse 
ratio  to  income, 

I  n  the  face  of  this  social  development  the  cry  for 
concentration  of  local  taxation  on  site  values  will  re- 
commend itself  in  principle  to  nobody  except  those 
whose  income  is  derived  exclusively  from  industrial 
dividends.  Colossal  as  the  phenomenon  of  "  un- 
earned increment "  is  in  great  cities,  it  differs  in 
nothing  but  its  obviousness  from  the  incomes  which 
result  from  it  when  it  is  invested  in  industrial  enter- 
prise. When  a  ground  landlord  sells  an  acre  of  land 
in  the  centre  of  London  for  a  million,  and  invests 
that  million  in  Consols  which  bring  him  in  ^25,000 
a  year,  he  does  not  exchange  an  unearned  income 
for  an  earned  one  :  he  only  exchanges  a  position  of 
responsibility  as  a  landholder  strongly  interested  in 
keeping  up  the  character  of  a  London  neighbor- 
hood, for  a  position  of  indifference  to  all  public  con- 
siderations whatsoever.  To  exempt  him  from  rating 
at  the  expense  of  the  purchaser  of  his  acre  would  be 


The  Municipal  Revenue        95 

to  make  the  landlord  a  Jonah  and  throw  him  to 
the  whale  of  Socialism.  If  any  discrimination  is  made 
between  classes  of  proprietors  it  should  operate 
in  the  other  direction.  Lord  Cadogan  and  the 
Dukes  of  Westminster,  Bedford,  Portland,  etc., 
may  with  some  plausibility  claim  that  the  difference 
between  their  properties  and  the  surrounding  ones 
is  worth  paying  them  for.  Sir  Gorgius  Midas  and 
his  progeny  have  nothing  to  say  for  themselves  at 
all.  It  may,  of  course,  be  politically  convenient  to 
enlist  Sir  Gorgius  for  the  attack  on  the  landlords, 
and  then,  when  the  battle  is  won,  invite  the  land- 
lords to  revenge  themselves  by  joining  in  the  cam- 
paign for  a  graduated  and  differentiated  Income 
Tax,  exactly  as  the  landlords  revenged  themselves 
for  Free  Trade  by  carrying  the  Factory  Acts  against 
the  manufacturers.  But  this  treatise  is  concerned 
not  with  parliamentary  tactics,  but  with  political 
science. 

Perhaps  the  most  urgently  needed  discrimina- 
tion is  between  people  who  are  able  to  pay  rates 
on  some  scale  or  other  and  those  who  cannot  afford 
to  pay  them  at  all.  It  is  admitted  that  persons  with 
incomes  of  less  than  ^  1 60  a  year  cannot  afford  to 
pay  income  tax;  and  we  allow  abatement  even  to 
people  with  as  much  as  ^^699  a  year.  Now  we  have 
multitudes  of  small  tradesmen  and  shopkeepers  who 
make  less  than  _^  1 60  a  year,  and  are  nevertheless 
left  staggering  under  the  burden  of  rates  of  from 
six  to  nine  shillings  in  the  pound  on  the  valuation 


96  Municipal  Trading 

of  their  premises.  These  men  resist  the  rates  with 
desperation ;  and  they  are  quite  right.  Everything 
that  has  been  said  in  the  preceding  chapters  as  to 
the  productiveness  of  municipal  enterprise  can  be 
reduced  to  the  single  formula  that  municipal  trade 
is  a  good  investment.  So  is  life  insurance,  for  the 
matter  of  that ;  but  suppose  a  man  cannot  afford  the 
premium,  what  then  ? 

Let  us  examine  this  point  a  little  more  closely. 
The  cardinal  difference  between  private  and  muni- 
cipal enterprise  for  the  capitalist  is  that  investment 
in  the  one  is  voluntary,  whilst  investment  in  the 
other  is  compulsory.  Let  it  be  granted  as  a  set-off 
to  the  compulsion  that  the  municipal  investment  is 
unexceptional  in  point  of  soundness.  What  you  get 
then  is  Compulsory  Investment,  which  many  rash 
people  think  must  be  a  thrifty  thing,  because  they 
identify  investment  with  saving,  and  cannot  conceive 
saving  as  wrong  under  any  circumstances.  As  a 
matter  of  fact,  for  the  majority  of  the  unfortunate 
inhabitants  of  these  islands,  thrift  in  this  sense  is  one 
of  the  most  heartless  and  ruinous  of  all  the  vices.  A 
poor  woman  who  receives  five  shillings  can  always 
take  it  to  the  post  office  savings  bank  and  refrain 
from  spending  it  on  the  wants  of  the  moment.  Many 
well  intentioned  people  who  have  been  made  hope- 
lessly silly  in  money  matters  by  large  independent 
incomes,  habitually  urge  working  folk  to  take  this 
course  on  all  occasions,  apparently  under  the  impres- 
sion that  the  wants  of  the  moment  for  the  poor  refer 


The  Municipal  Revenue       97 

exclusively  to  gin.  But  it  is  clear  that  if  the  woman's 
boots  are  falling  to  pieces,  the  purchase  of  a  new  pair 
will  be  a  far  more  thrifty  proceeding  than  the  bank- 
ing of  the  money.  The  Hves  of  most  poor  women  is 
a  continual  struggle  to  keep  themselves  and  their 
children  dryshod.  I  purposely  leave  the  food  ques- 
tion, the  starving  child,  the  aged  father  and  so  forth 
out  of  the  question,  because  purchasers  of  half  crown 
books  on  Municipal  Trading  regard  them  as  melo- 
dramatic figments,  though  they  are  the  most  constant 
and  pressing  realities  to  millions  of  poor  people. 

In  short,  saving  and  investment  are  quite  second- 
ary duties  :  the  first  and  the  hardest  is  expenditure 
on  present  needs.  Saving,  investment,  life  assurance, 
all  of  them  most  prudent  and  excellent  operations 
for  people  who  have  had  as  much  of  present  nourish- 
ment as  they  need,  and  still  have  something  to  spare, 
are,  for  heads  of  families  in  a  state  of  privation,  slow 
forms  of  suicide  and  murder  ;  and  those  who  preach 
them  indiscriminately  should  be  indicted  for  incite- 
ment to  crime.  When  a  bishop  offends  in  this  way, 
people  who  really  understand  the  situation  feel  their 
blood  rising  almost  to  guillotining  point.  Yet,  after 
all,  the  bishop  does  not  force  people  to  take  his  in- 
considerate advice.  But  the  municipality  does.  The 
London  County  Council,  for  instance,  goes  to  many 
an  unfortunate  wretch  grimly  struggling  with  poverty 
in  a  little  shop,  underfed, underclothed,  underhoused, 
and  consequently  desperately  in  want  of  more  money 
to  spend  on  himself  and  his  family.  Taking  him  by 


98  Municipal  Trading 

the  scrufF  of  the  neck,  it  says  to  him,  "  Come :  you 
must  invest  in  the  general  prosperity  of  this  magni- 
ficent metropolis,  of  which  you  are — or  ought  to 
be — proud  to  be  a  citizen.  You  must  no  longer  cross 
the  Thames  in  a  wretched  penny  ferry  boat  :  you 
must  build  a  colossal  Tower  Bridge,  with  splendid 
approaches  ;  or  you  must  pass  underneath  in  tubu- 
lar triumphs  of  modern  engineering.  You  must  no 
longer  walk  through  slums  from  the  Strand  to 
Oxford  Street  :  you  must  make  a  new  and  lordly 
avenue  flanked  with  imposing  buildings.  And  you 
must  cheer  yourself  up  with  parks  and  bands,  and 
run  delightful  steamboats  on  the  river  for  your  re- 
creation on  summer  evenings."  Is  it  any  wonder 
that  the  unhappy  victim  of  this  comprehensive  civic 
patriotism  turns  savagely  on  his  Progressive  bene- 
factors and  asks  them  whether  they  suppose  his 
name  is  Carnegie  or  Pierpont  Morgan  or  Roths- 
child that  he  should  be  forced  into  the  schemes  of 
millionaires.  And  the  irony  of  the  proposals  is  the 
more  biting  as  he  well  knows  that  if  the  improve- 
ments happen  to  eff*ect  his  own  business  beneficially, 
his  landlord  will  take  the  first  opportunity  to  appro- 
priate the  increment  by  putting  up  his  rent. 

This  grievance  is  one  which  cannot  be  argued 
away,  and  cannot  without  gross  callousness  be  dis- 
regarded. There  should  clearly  be  complete  ex- 
emption from  rates  for  persons  whose  income  is 
below  a  certain  figure.  We  have  no  right  to  force 
on  people  conveniences  that  they  cannot  afford.  The 


The  Municipal  Revenue       99 

particular  device  by  which  this  is  to  be  effected  need 
not  be  gone  into  here.  It  is  enough  to  say  that 
though  a  general  reduction  of  rates  would  end  in 
an  equivalent  increase  of  rents,  and  although  the 
exemption  of  a  particular  class  of  tenants  would 
enable  the  landlords  to  confiscate  some  of  the  relief 
exactly  as  the  employers  of  pensioners  manage  to 
confiscate  some  of  the  pension  by  paying  lower 
wages  to  the  pensioner,  yet  an  exemption  applying 
only  to  particular  and  exceptional  cases  could  not 
produce  anything  like  an  equivalent  rise  of  rents. 

The  moral  is  that  the  relief  of  the  ratepayer, 
whose  burdens  are  heavy  enough  to  crush  all  en- 
thusiasm for  municipal  schemes  that  threaten  to 
raise  the  rates,  should  be  accomplished  by  taxation 
of  income,  heavily  graduated  and  differentiated 
against  unearned  income.  It  could  be  collected  by 
the  Inland  Revenue  Department  and  distributed  by 
the  method  of  grants  in  aid.  The  grant  in  aid  is  an 
excellent  device  when  it  is  made  conditional  on  the 
efficiency  of  the  services  for  which  it  is  earmarked ; 
and  this,  of  course,  implies  control  and  criticism  by 
a  vigorous  and  capable  Local  Government  Board. 

On  the  continent,  taxation  of  income  for  local 
purposes  is  freely  resorted  to  ;  and  each  town  has 
a  custom  house,  or  octroi,  at  every  gate.  There  is 
an  octroi  at  Newcastle-on-Tyne,  and  perhaps  in 
some  other  English  towns  ;  and  there  is  no  valid 
theoretic  objection  to  this  means  of  raising  local 
revenue,  except  the  impracticable  general  objection 


loo  Municipal  Trading 

to  all  indirect  taxation.  But  as  an  octroi  is  an  in- 
tolerable hindrance  to  people  who  are  unaccustomed 
to  it,  and  as  taxation  of  income,  and  even  ordinary 
rating,  are  far  more  scientific  methods  of  raising 
local  revenue,  it  is  not  likely  to  be  resorted  to  un- 
less an  absolute  refusal  of  the  electorate  to  sanction 
sufficient  direct  taxation  to  meet  the  growing  neces- 
sities of  the  municipal  exchequer  makes  a  crude 
resort  to  indirect  taxation  unavoidable. 

There  is  another  difficulty  in  municipal  finance. 
When  there  is  any  work  to  be  done  by  a  munici- 
pality, the  question  presents  itself,  shall  it  be  paid 
for  out  of  the  general  rate  for  the  half  year,  or  shall 
it  be  paid  for  by  a  loan  ? 

According  to  the  popular  view,  the  thrifty  course 
is  to  pay  as  you  go,  and  not  add  to  "  the  burden 
of  municipal  debt."  The  correct  financial  theory 
is  undoubtedly  just  the  reverse  :  all  expenditure  on 
public  works  should  be  treated  as  capital  expendi- 
ture. The  capital  should  be  raised  in  the  cheapest 
market,  and  the  rates  used  to  pay  the  interest  and 
sinking  fund.  When  a  municipahty  which  can 
borrow  at  less  than  4%  deliberately  extorts  capital 
for  public  works  from  tradesmen  who  have  to  raise 
it  at  from  10  to  40%  or  even  more,  it  is  clearly 
imposing  the  grossest  unthrift  on  its  unfortunate 
constituents.  In  practice  everything  depends  on  the 
duration  of  the  work.  It  would  be  absurd  to  pay 
for  an  electric  lighting  plant  out  of  the  half  year's 
revenue.  It  would  be  silly  to  raise  a  loan  to  clear 


The  Municipal  Revenue.  .  ;.i;0][ 

away  a  snowfall.  But  between' theSe  extremes'  there' 
is  much  debateable  ground  on  which  the  economic 
presumption  is  usually  quite  erroneously  taken  to  be 
in  favor  of  present  payment.  The  result  may  be  a 
rate  so  high  that  the  struggling  ratepayers  (a  large 
class  in  our  cities)  have  to  borrow  the  money  to  pay 
it,  in  which  case  they  are  clearly  raising  capital  on 
their  own  private  credit  at  comparatively  exorbitant 
interest  instead  of  on  their  public  credit  through 
the  municipality.  This  is  due  solely  to  the  habit 
of  calling  the  capital  of  the  municipality  its  debt. 
Municipal  trading  is  the  best  cure  for  this  habit  ; 
and  one  of  its  indirect  advantages  is  that  it  trains 
councillors  and  auditors  to  take  a  much  more  in- 
telligent and  considerate  view  of  the  ratepayers' 
interest  than  they  do  at  present. 

In  comparing  municipal  with  commercial  enter- 
prise, the  power  of  the  municipality  to  make  appar- 
ently unlimited  calls  on  the  ratepayers'  pockets  is 
generally  classed  with  those  advantages  on  the  muni- 
cipal side  which  are  so  overwhelming  as  to  be  called 
unfair,  meaning  only  that  they  are  advantages  be- 
yond the  reach  of  commerce.  In  the  same  sense  the 
competition  of  the  mammoth  universal  provider  with 
the  petty  shopkeeper  is  unfair;  the  competition  of 
the  electric  light  with  gas,  or  of  the  railway  with 
the  stage  coach  was  unfair;  and  the  use  of  rifles  by 
civilized  armies  against  Zulus  armed  with  assegais 
is  unfair.  But  it  is  easy  to  exaggerate  the  advantage 
of  the  municipality  in  this  respect.  Every  additional 


IQ2  ,        Municipal  Trading 

penny  in  the  pound  is  so  fiercely  contested  by  the 
ratepayer,  who  is  also  an  elector,  that  far  more  mis- 
chief is  done  and  money  wasted  by  municipal  im- 
pecuniosity  than  by  municipal  extravagance.  In  spite 
of  the  fact  that  our  citizens  get  better  value  for  their 
rates  than  for  any  other  portion  of  their  expenditure, 
they  voluntarily  give  thousands  to  company  pro- 
moters to  make  ducks  and  drakes  of  with  a  better 
grace  than  they  give  shillings  to  the  rate  collector 
for  the  most  indispensable  requirements  of  civiliza- 
tion. When  the  election  comes  round,  woe  to  the 
party  that  has  put  up  the  rate !  If  any  opponent  ot 
municipal  trading  really  thinks  that  the  ratepayers' 
pocket  is  the  treasury  of  Rhampsinitis,  let  him 
become  a  municipal  councillor  and  try. 


XI 

OUR  MUNICIPAL  COUNCILLORS 

Whoever  has  grasped  the  full  scope  of  the  case 
for  Municipal  Freedom  of  Trade  will  see  that  the 
practicability  of  public  enterprise  is  limited  only 
by  the  capacity  of  its  organizers  and  administrators. 
And  this  raises  the  question,  where  are  we  to  find 
our  municipal  statesmen  ? 

Let  us  first  see  what  attractions  the  career  of 
a  municipal  councillor  offers,  and  what  its  draw- 
backs are. 

As  compared  with  a  member  of  parliament,  a 
municipal  councillor  has  an  almost  unbounded 
liberty  of  conscience  and  initiative.  The  party  dis- 
cipline which  is  a  necessity  in  Parliament  does  not 
exist  in  municipal  government,  because  the  pro- 
cedure of  the  councils  differs  widely  from  that  of 
the  House  of  Commons.  There  is  no  Cabinet,  no 
Government,  and  no  Opposition.  There  are,  of 
course,  Moderates  and  Progressives,  Conservatives 

103 


104  Municipal  Trading 

and  Liberals,  Labor  members  and  Independents, 
Established  Churchmen,  Free  Churchmen,  and  No 
Churchmen  ;  and  these  form  voting  combinations, 
and  carry  their  alliances  and  their  feuds  into  the 
council  chamber,  appointing  "  whips,"  holding 
party  meetings,  and  playing  at  party  government 
by  offering  perfectly  imaginary  services  to  the  real 
parliamentary  parties  in  order  to  increase  their 
sense  of  personal  importance,  and  to  establish  a 
claim  for  their  leaders  on  birthday  honors  and  on 
adoption  as  parliamentary  candidates,  or  at  least 
on  the  fantastic  orders  of  chivalry  established  by 
the  Primrose  League  and  its  imitators.  But  all  this 
is  child's  play,  because  there  is  no  Government  in 
the  parliamentary  sense,  and  consequently  a  vote 
against  one's  own  party  involves  no  ulterior  conse- 
quences. 

This  will  be  better  understood  from  a  descrip- 
tion of  the  organization  of  a  municipality.  The 
executive  work  is,  of  course,  done  departmentally 
by  a  paid  permanent  municipal  staff.  There  is  a 
sanitary  department  with  the  Medical  Officer  of 
Health  as  technical  chief  and  a  Chief  Clerk  as 
business  chief.  There  is  a  Highways,  Sewers  and 
Public  Works  department  (or  some  such  title) 
under  the  Borough  Engineer  and  a  Chief  Clerk. 
There  is  a  Finance  and  Rating  department  under 
the  Borough  Treasurer  or  City  Accountant  and  a 
Chief  Clerk.  There  is  perhaps  an  Electric  Light- 
ing   Department,  under    the   Electrical   Engineer 


Our  Municipal  Councillors    105 

and  a  Chief  Clerk.  And  so  on,  the  central  de- 
partment being  the  General  Business  department 
under  the  Town  Clerk,  who  is  the  head  of  the 
official  hierarchy.  On  the  parliamentary  system, 
each  of  these  departments  would  be  presided  over 
by  a  councillor  selected  on  strict  party  lines  ;  and 
these  presiding  councillors  would  be  called  Ministers 
and  would  form  a  Cabinet,  the  "  first  lord  "  of  the 
General  Business  department  being  the  Prime 
Minister  and  leader  of  the  Council.  All  regular 
municipal  legislation  would  be  brought  for- 
ward by  this  Cabinet  ;  and  on  the  rejection 
of  any  of  their  resolutions,  or  the  carrying 
of  a  vote  of  censure  against  them,  they  would 
resign  ;  a  general  election  would  take  place  in  the 
borough,  and  a  new  Council  be  elected  ;  and  a 
new  Cabinet  would  be  formed.  And  the  ejffect  of 
this  system  would  be  that  no  member  would  be 
free  to  vote  on  any  measure  on  its  merits,  because, 
as  the  effect  of  his  defeating  it  would  be  to  change 
the  whole  Government  of  the  district  (with  the 
general  policy  of  which  he  might  be  in  cordial 
agreement)  and  transfer  it  to  another  party  (the 
general  policy  of  which  he  might  consider  ruinous), 
besides  putting  himself  and  the  ratepayers  to  the 
heavy  expense  of  an  election,  he  would  find  him- 
self repeatedly  voting  simply  to  keep  his  party  in 
office  without  the  slightest  reference  to  the  par- 
ticular measure  at  stake,  and  would  finally  give  up 
all  pretence  of  discussion,  and  insist  on  being  pro- 

E  2 


io6  Municipal  Trading 

vided  with  a  comfortable  smoking  room  or  library 
in  which  he  could  sit  at  his  ease  until  a  bell  was 
rung  to  call  him  to  the  voting  lobby. 

There  is,  providentially,  nothing  of  this  sort  in 
the  municipal  councils.  Each  department  is  con- 
trolled by  a  committee  of  councillors  ;  and  each 
committee  elects  its  own  chairman.  The  business 
of  the  department  is  brought  before  the  committee 
by  the  Chief  Clerk  and  the  chief  of  the  technical 
staff.  The  decisions  of  the  committee  are  embodied 
in  a  series  of  resolutions.  These  resolutions  form 
the  report  of  the  committee  ;  and  at  the  next  meet- 
ing of  the  full  council,  the  chairman  rises  and 
"  moves  his  report " :  that  is,  he  moves  all  the 
resolutions  of  the  committee  ;  and  the  Council 
adopts  them  or  not,  as  it  pleases.  It  happens  quite 
commonly  that  an  amendment  is  moved  and  carried ; 
or  the  resolution  is  referred  back  for  further  con- 
sideration ;  or  it  is  flatly  rejected.  But  nothing 
else  happens.  The  chairman  may  be  disappointed 
or  indignant  ;  but  he  does  not  resign.  The  com- 
mittee may  sulk  for  a  while  ;  but  it  goes  on  just 
as  before.  The  chairmen  do  not  form  a  Cabinet  in 
any  sense.  They  do  not  all  belong  necessarily  to 
the  same  party  even  when  they  are  elected  on  party 
lines  ;  for  the  party  that  is  in  a  majority  in  one 
committee  may  be  in  a  minority  on  another.  In 
many  bodies  the  custom  is  to  give  every  party  its 
share  of  the  chairmanships  ;  and  in  almost  all,  old 
members  are  allowed  sooner  or  later  to  have  their 


Our  Municipal  Councillors   107 

turn  in  the  chair  without  regard  to  their  opinions 
and  often  without  regard  to  their  fitness  for  the 
duty,  in  which  case  the  waste  of  time  in  committee  is 
extremely  trying  to  the  more  businesslike  councillors. 
As  to  an  appeal  to  the  constituency  by  way  of 
general  election,  it  is  out  of  the  question.  The 
councillors  are  elected  for  a  fixed  period  ;  and  no 
action  of  the  council,  short  of  a  resolution  accepting 
the  simultaneous  resignation  of  all  its  members — 
a  plan  outside  practical  politics — can  shorten  or 
lengthen  its  own  term  of  office. 

Under  these  circumstances  independence  of 
thought  and  character  is  not  strangled  in  municipal 
public  life  as  it  is  in  the  House  of  Commons. 
When  a  recruit  has  once  mastered  the  procedure 
and  taken  the  measure  of  a  municipal  council,  he 
can,  if  he  has  ability  enough,  make  himself  as  much 
of  a  Prime  Minister  in  ten  minutes  as  the  senior 
alderman.  He  can  indulge  in  cross  voting  without 
stint.  He  can  get  a  chairmanship  quite  as  soon  as 
he  knows  enough  to  be  something  more  than  the 
puppet  of  the  officials.  No  doubt,  if  his  ambition  is 
fashionable,  he  will  find  the  House  of  Commons  a 
better  address  than  the  Town  Hall.  But  if  he 
values  useful  public  activity  and  freedom  of 
conscience,  he  will  find  a  municipality  enormously 
superior  to  parliament,  unless  his  political  talent 
or  family  influence  is  of  a  very  unusual  order. 

It  will  now  be  asked  why,  under  these  tempting 
circumstances,    it    is    so    difficult    to    get    efficient 


io8  Municipal  Trading 

candidates  for  the  municipal  councils.  The  root 
cause  is  no  doubt  that  insisted  on  long  ago  by- 
Plato  :  namely,  that  capable  men  understand  too 
well  how  difficult  and  responsible  public  work  is,  to 
be  particularly  anxious  to  undertake  it  ;  so  that 
the  first  qualification  for  public  life  ought  to  be  a 
strong  reluctance  to  enter  it.  It  is  no  exaggeration 
to  say  that  the  strongest  man  can  kill  himself  with 
overwork  even  on  a  town  council  if  he  attempts  to 
do  everything  there  is  for  him  to  do.  A  wise 
insurance  company  would  prefer  a  cabinet  minister's 
life  to  a  municipal  chairman's,  if  the  chairman 
shewed  any  disposition  to  do  his  work  thoroughly 
and  seriously. 

On  the  other  hand,  nothing  is  easier  than  to  sit 
on  a  council  and  do  nothing.  The  claim  of  the 
House  of  Commons  to  be  the  best  club  in  London 
is  far  more  questionable  than  the  claim  of  the 
municipal  council  to  be  the  best  club  accessible 
to  most  of  its  members.  It  is  possible  for  a 
councillor  to  be  stupendously  ignorant  and  shame- 
lessly lazy,  and  yet  to  be  not  only  popular  with 
his  fellow  councillors,  but — provided  he  is  a 
tolerably  entertaining  speaker — with  the  ratepayers 
also.  He  passes  for  a  very  busy  public  man  when 
he  is  really  only  a  sociable  one,  by  attending  all 
his  committees  and  doing  nothing  on  them. 

There  is  at  present  no  way  in  which  the  municipal 
faineant  can  be  brought  to  book,  even  if  a  com- 
munity which  does  not  pay  for  his  services  had  any 


Our  Municipal  Councillors    109 

right  to  make  the  attempt.  Payment  of  directors' 
fees  would  not  improve  matters  :  the  guinea-pig 
has  been  tried  in  private  enterprise  and  found 
wanting.  Still,  there  is  a  great  deal  to  be  said  for 
payment  of  members  of  municipal  bodies.  It  would 
make  the  voters  much  more  jealous  and  exacting 
as  to  the  personal  qualifications  and  public  industry 
of  their  representatives,  besides  producing  some 
sort  of  consciousness  that  membership  of  a  local 
authority  really  means  useful  work  and  not  mere 
ceremonial.  Far  from  substituting  selfish  motives  for 
public  ones,  it  would  relieve  municipal  work  from 
the  reproach  that  men  have  no  reasons  but  inter- 
ested— not  to  say  corrupt — reasons  for  undertaking 
it.  It  would  give  capable  Labor  leaders  that  train- 
ing in  public  life  without  which  they  are  apt  to  be 
socially  dangerous  in  direct  proportion  to  their 
ability  and  earnestness,  and  with  which  they  stand 
so  usefully  for  the  whole  community  as  well  as  for 
their  own  class  against  the  sordidness  and  exclusive- 
ness  of  the  commercial  classes  and  the  social  ignor- 
ance and  thoughtlessness  of  the  aristocracy.  Labor 
representatives  usually  make  excellent  councillors, 
because  they  are  much  more  severely  criticized 
than  their  middle  class  colleagues.  It  is  possible 
for  a  middle  class  councillor  to  sit  on  a  munici- 
pality for  twenty  years  in  a  condition  of  half- 
drunken  stupor  without  exposure  and  defeat  at  the 
poll  ;  but  Labor  councillors  receive  no  such  in- 
dulgence. As  a  rule  they  take  their  public  business 


no  Municipal  Trading 

very  seriously  ;  are  free  from  the  social  pressure 
which  leads  to  so  much  reciprocal  toleration  of 
little  jobs  and  venial  irregularities  among  the 
middle  class  men  of  business  ;  have  the  independ- 
ence of  professional  men  without  their  class  pre- 
judices ;  are  exceptionally  sensitive  to  the  dignity 
of  sobriety  and  respectable  conduct  ;  and,  as  they 
usually  pay  inclusive  rents,  never  deliberately  shelve 
necessary  public  work  because  it  may  mean  an 
extra  rate  of  an  eighth  of  a  penny  in  the  pound. 
Thus,  oddly  enough,  the  municipal  Labor  mem- 
ber generally  finds  himself  in  alliance  with  the 
councillors  who  are  too  rich  to  be  penny-wise  and 
pound-foolish,  and  with  the  professional  men  whose 
livelihood  has  always  depended  on  their  own  per- 
sonal skill,  in  opposition  to  the  petty  shopkeepers 
and  employers  whose  cramped  horizon  and  short- 
sighted anxiety  to  keep  down  the  rates  at  all 
costs  are  the  main  stumbling  blocks  in  the  way  of 
municipal  enterprise. 

The  tyranny  of  the  petty  tradesman  Is  a  serious 
evil  in  municipal  life.  The  municipal  constituency 
is  small — only  a  ward  ;  and  the  bigger  and  more 
important  the  city,  the  fewer  votes  will  secure  a 
seat,  because  of  the  difficulty  of  inducing  busy 
or  fashionable  people  to  vote  at  all  :  in  fact,  it 
is  easier  to  poll  a  village  to  the  last  man  than 
to  poll  50%  of  the  electors  in  a  London  ward. 
The  squares  and  the  slums  have  the  same  reason 
for  not  voting,  because  the  city  man,  the  laborer 


Our  Municipal  Councillors   1 1 1 

and  the  artisan  are  alike  in  respect  of  not  working 
at  their  homes  ;  so  that  when  they  return  home 
tired  in  the  evening  they  will  not  turn  out  again 
in  the  raw  November  darkness,  and  trudge  through 
the  mud  to  the  polling  station  at  the  request  of 
that  enthusiastic  pest  the  canvasser.  The  result  is 
that  the  smaller  shopkeepers  elect  one  another, 
since  they  can  vote  at  any  moment  of  the  day  by 
leaving  their  shops  for  a  few  minutes. 

To  canvass  for  this  shopkeeping  vote  is  an  art 
in  itself,  and  one  which  men  of  superior  education 
and  liberal  ideas  cannot  be  induced  to  study  and 
practise.  The  small  shopkeeper  does  not  understand 
finance,  nor  banking,  nor  insurance,  nor  sanitary 
science.  The  social  distinction  between  him  and  the 
working  class  is  so  small  that  he  clings  to  it  with  a 
ferocity  inconceivable  by  a  peer,  and  will  concede 
nothing  to  a  laborer  that  is  not  either  begged  humbly 
as  a  favor  or  extorted  by  force  of  Trade  Unionism. 
A  proposal  to  give  women  living  wages  instantly 
brings  before  him  a  vision  of  "  the  girl  at  home," 
encouraged  in  uppishness,  and  asking  another  shil- 
ling a  week.  His  pocket  is  so  shallow  that  an  extra 
penny  in  the  pound  appals  him,  not  because  it 
means  an  extra  five  or  ten  thousand  pounds  of 
revenue,  but  because  it  will  cost  him  individually 
another  half  crown  or  five  shillings.  The  fate  of 
an  intelligent  candidate  who  does  not  use  his  speech 
to  conceal  his  thoughts  may  be  imagined.  Very 
much  more  reasonable  men  than  Coriolanus  are 


112  Municipal  Trading 

defeated  at  every  election  because  they  betray  large 
views  of  municipal  business  instead  of  passionately 
affirming  their  own  merits,  vituperating  their  op- 
ponents recklessly,  and  flattering  the  follies  of  the 
most  narrow-minded  electors.  And  so,  though  a 
doctor  may  get  in  by  the  votes  of  his  patients,  and 
a  minister  of  religion  by  those  of  his  congregation 
and  of  his  poor,  the  small  shopkeeper  is  master  of 
the  municipal  situation.  His  ideas  rule  all  the  urban 
local  bodies.  The  28  London  Borough  Councils  are 
completely  in  his  hands.  Even  when  he  finds  in  his 
own  ranks  men  of  remarkable  shrewdness  and  some 
capacity  for  large  ideas,  he  keeps  them  rigidly 
under  his  thumb;  and  they,  knowing  that  an  appeal 
to  the  more  liberal  classes  would  not  be  responded 
to,  accept  their  servitude  and  become  what  the 
Americans  call  "  ward  bosses."  We  do  not  conde- 
scend to  name  them  at  all,  vestrydom  being  too 
little  considered  to  be  worth  an  English  terminology. 
One  remedy  for  this  is  to  make  voting  as  easy 
for  the  city  man  as  it  is  for  the  local  tradesman. 
Our  plan  of  making  an  election  as  great  a  nuisance 
as  possible  to  everyone  concerned  gives  an  over- 
whelming advantage  to  the  man  who  has  nothing 
to  do  but  "  slip  round  the  corner  and  vote  "  in  the 
slack  moments  of  a  business  that  actually  consists 
of  interruptions  and  intrusions.  The  barrister,  the 
doctor,  the  man  of  science,  the  author,  the  financier, 
the  head  of  a  large  business,  cannot  be  disturbed  in 
this  way.  If  he  cannot  vote  by  post,  preserving  the 


Our  Municipal  Councillors    113 

secrecy  of  the  ballot  by  the  familiar  expedient  of  an 
outer  and  inner  envelope,  he  will  not  vote  at  all. 
Even  the  laborer  is  now  learning  to  meet  the  can- 
vasser with  "  I  will  come  if  you  send  a  carriage  for 
me,"  thus  creating  a  grievance  for  the  candidate 
who  has  no  carriages  or  carriage-keeping  friends, 
and  imposing  an  intolerable  corvee  on  the  people 
who  do  keep  carriages,  and  whose  friends  borrow 
them  for  elections.  A  great  deal  of  the  apparent 
failure  of  democracy  to  secure  the  best  available 
public  representatives  is  really  a  failure  to  adapt  our 
method  of  taking  the  vote  to  the  convenience  and 
susceptibilities  of  the  more  thoughtful  and  cultivated 
classes.  We  ignore  the  fact  that  what  Plato  said  of 
the  representative  :  that  the  reluctant  and  not  the 
eager  man — the  man  who  feels  the  weight  of  a 
crown  and  not  he  who  is  dazzled  by  its  glitter — 
should  be  chosen,  has  its  application  to  the  voter  also. 
The  partisan  whom  no  weather  and  no  distance  can 
keep  from  the  polling  booth  is  not  necessarily  a  better 
judge  of  a  candidate  than  the  man  who  has  to  be 
coaxed  to  undertake  the  very  grave  responsibility  of 
choosing  the  government  of  the  town  for  the  next 
three  years.  Yet,  far  from  coaxing  him,  we  handicap 
him  by  arrangements  which  give  a  long  start  to 
political  rancor,  personal  thickness  of  skin,  and, 
above  all,  to  the  shop  round  the  corner. 

Still,  there  is  something  to  be  said  for  the  petty 
tradesman.  He  is  shrewd  and  effective  enough  when 
he  is  in  his  depth  ;  and  his  local  knowledge  is  indis- 


114  Municipal  Trading 

pensable.  The  policing  and  sanitation  of  a  city 
consist  largely  of  a  running  fight  with  petty  nuisances 
and  abuses  to  which  the  gossip  of  a  street  is  a  better 
guide  than  the  most  comprehensive  municipal  states- 
manship. When  the  absurdity  of  the  present  muni- 
cipal areas  forces  us  to  reconstruct  our  whole  scheme 
of  local  government,  there  will  still  be  a  place  for 
local  committees  to  deal  with  the  small  change  of 
municipal  life ;  and  on  these  local  committees  the 
petty  shopkeeper  will  be  as  useful  as  he  is  noxious 
on  bodies  whose  scope  far  transcends  his  homely 
little  outlook. 


XII 

CONCLUSION 

The  conclusion  of  this  statement  of  the  case  for 
Municipal  Trading  leaves  the  reader  still  at  the 
beginning  of  the  subject,  but,  it  is  hoped,  in  an  in- 
telligent and  unbewildered  attitude.  It  will  save 
him  the  trouble  of  a  struggle  with  irrelevant  rows 
of  figures  paraded  to  prove  that  municipal  trade 
does  not  pay.  It  will  also  save  him  the  trouble  of 
reading  ingenious  attempts  to  confute  these  de- 
monstrations from  their  own  point  of  view ;  for  he 
will  understand  that  though  the  demonstrations  may 
be  erroneous  in  this  or  that  instance,  and  though  a 
Borough  Treasurer  may  keep  the  municipal  books  in 
such  a  way  as  to  give  his  accounts  the  utmost  com- 
mercial plausibility,  yet  in  the  very  cases  where 
municipal  trading  is  most  profitable  to  the  rate- 
payer, its  departmental  expenses  are  and  ought  to 
be  greater,  and  its  surpluses  (if  any)  are  and  ought 
to  be  less  than  those  of  a  private  firm  doing  the 

"5 


1 1 6  Municipal  Trading 

same  work — nay,  that  when  the  municipality  under- 
takes at  a  heavy  departmental  loss  work  that  has 
previously  been  carried  on  by  commercial  con- 
tractors at  a  tempting  commercial  profit,  the  rate- 
payers are  probably  saving  more  by  this  apparently 
bad  bargain  than  by  the  municipal  gas  works  and 
tram  lines  which  not  only  do  not  cost  them  a  farthing 
out  of  pocket,  but  actually  contribute  hard  cash  to 
the  rates  as  well. 

On  the  other  hand  he  will  see  that  municipal 
statesmanship,  far  from  having  been  simplified  by  a 
safe  Socialistic  formula,  now  requires  from  its  Coun- 
cillors much  more  knowledge,  ability,  and  character, 
than  the  old  system,  which  had  a  really  simple  for- 
mula in  the  rule  :  Do  nothing  that  can  be  left  to  pri- 
vate enterprise.  In  our  reassurance  at  the  discovery 
that  the  bogey  of  increasing  municipal  indebtedness 
is  only  the  comfortable  phenomenon  of  growing 
municipal  capital,  we  must  not  forget  that  over- 
capitalization is  as  possible,  if  not  as  probable,  in 
public  as  in  private  finance,  and  that  a  councillor  must 
not  only  be  in  favor  of,  say,  a  municipal  supply  of 
electric  light,  but  must,  when  that  point  is  carried, 
have  sense  enough  not  to  buy  more  horse  power 
than  is  necessary,  nor  lay  a  cable  down  a  country 
road  for  the  sole  sake  of  the  mayor's  brother-in-law 
who  has  a  villa  at  the  far  end,  nor  appoint  a  civil 
but  unqualified  young  man  as  engineer  merely  be- 
cause he  is  the  sole  support  of  his  aged  mother. 
On  the  other  hand,  he  must  not  clamor  for  the 


Conclusion  117 

municipalization  of  the  section  of  a  great  trunk  line 
of  railway  that  happens  to  cross  his  borough,  nor 
press  the  Parks  Committee  to  undertake  the  muni- 
cipal breeding  of  elephants  for  the  sake  of  having  a 
Jumbo  for  the  children  to  ride  on.  Every  proposal 
to  municipalize  lies  somewhere  on  the  scale  between 
these  extremes,  and  must  be  judged  in  council,  not 
according  to  a  Socialist  or  Anti-Socialist  canon,  but 
according  to  its  place  on  the  scale,  and  always  in 
view  of  the  complicated  social  reactions  analyzed  in 
the  preceding  pages. 

Now  this  is  not  work  for  the  political  partisans 
and  convivial  vestrymen  who  still  look  on  an  alder- 
man's robe  or  a  mayor's  chain  as  the  crowning 
ornament  of  a  successful  commercial  career,  and 
on  a  Council  as  a  Masonic  Lodge  where  members 
can  make  useful  acquaintances  and  put  valuable 
pieces  of  business  in  one  another's  way.  Complete 
disinterestedness  is  neither  an  attainable  quality 
nor  a  desirable  one  ;  for  it  means  complete  in- 
difference ;  and  an  attempt  to  *'  purify  "  politics  by 
getting  rid  of  all  personal  motives  is  apt  to  end 
like  an  attempt  to  purify  card  playing  by  abolish- 
ing the  stakes  :  the  keenest  lovers  of  the  game  for 
its  own  sake  are  the  first  to  insist  on  stakes  in  order 
to  make  the  others  play  carefully.  A  very  little 
practical  experience  will  convince  the  youngest 
idealist  that  the  way  to  set  a  man  to  work,  in 
public  as  in  private,  is  to  give  him  an  axe  to  grind, 
and  that  nothing  gets  done  until  it  becomes  a  job 


1 1 8  Municipal  Trading 

for  somebody.  But  there  are  axes  and  axes.  One 
man,  being  a  shopkeeper,  seeks  election  because  he 
hopes  to  establish  a  claim  on  the  custom  of  the 
councillors  (some  of  them  heads  of  large  establish- 
ments) with  whom  he  will  become  intimate  at  the 
party  meetings.  When  he  is  elected  he  will  elect 
as  mayor  the  man  who  will  give  the  council  two 
banquets  a  year,  with  champagne,  rather  than  the 
strict  teetotaller  who  will  give  one,  with  lemonade, 
or  none.  This  naive  kind  of  interested  motive  is 
by  far  the  commonest  in  English  local  public  life. 
It  does  much  more  to  stultify  municipal  politics 
than  the  rapacity  of  the  slum  landlord  who  seeks 
election  to  protect  disorderly  houses  and  to  thwart 
the  administration  of  the  Housing  and  Public 
Health  Acts,  the  chicanery  of  the  country  jerry 
builder  who  aims  at  preventing  the  adoption  or 
hindering  the  administration  of  sanitary  by-laws, 
and  the  intrigues  of  the  publican  to  get  on  the 
rating  committee  so  as  to  mitigate  the  tendency  to 
assess  public  houses  on  ruthlessly  high  valuations. 
As  a  matter  of  fact,  in  large  cities,  the  better  sort 
of  builders  and  landlords  of  good  house  property 
have  exceptionally  strong  personal  interests  in  good 
municipal  government  ;  and  a  respectable  and  suc- 
cessful publican  without  either  ability  or  character 
is  almost  an  impossibility  ;  for  the  first  man  to  be 
demoralized  and  ruined  by  a  public  house  is  the 
publican  himself  if  his  character  is  vulnerable.  The 
really  dangerous  men  are  those  whose  motives  are 


Conclusion  119 

so  artless,  petty,  and  familiar,  that  they  are  imper- 
ceptible ;  and  it  is  these  simple  souls,  incapable  of 
mental  effort  or  social  comprehension,  who  stand 
blamelessly  in  the  way  of  all  far  reaching  municipal 
action,  whilst  downright  rogues  will  listen  keenly 
to  important  proposals,  and  even  support  them 
vigorously  if  any  pickings  seem  likely  to  come 
their  way. 

In  short,  for  obstructive  purposes,  twenty  sheep 
are  more  effective  than  fifty  wolves.  The  moral  is, 
not,  of  course,  to  elect  rascals,  but  to  prefer  political 
motives,  even  when  they  are  rooted  in  personal 
ambition,  to  commercial  motives,  convivial  motives, 
snobbish  motives,  and  especially  to  no  motives  at 
all.  Purely  political  successes  will  serve  the  turn 
of  a  man  who  has  the  right  temperament  for  public 
life  quite  well  enough  to  make  him  work  for  the 
public  good  without  any  abnormal  deficiency  in 
selfishness,  if  the  public  will  only  let  him.  What 
really  witholds  capable  and  highminded  men  from 
public  life  is  the  ignorance  and  intense  recalcitrance 
of  the  people  who  vote,  and  the  discouraging  indif- 
ference of  the  people  who  dont.  This  will  continue 
to  make  democracy  intolerable  until  we  deliberately 
and  carefully  teach  citizenship  to  our  children.  One 
intelligent  voter  is  worth  a  hundred  persons  who 
made  bad  Latin  verses  in  their  teens,  or  enjoyed  for 
one  day  in  their  childhood  a  more  or  less  accurate 
recollection  of  a  more  or  less  accurate  statement  in  a 
schoolbook  as  to  the  principal  products  of  Sumatra. 


I20  Municipal  Trading 

Finally,  it  has,  I  hope,  been  made  clear  that  the 
infancy  of  modern  local  government  must  no  longer 
be  hampered  by  our  ancient  parochialism.  The  in- 
jury done  us  by  foreign  frontiers,  with  all  their 
cannon  and  all  their  custom  houses,  is  as  nothing 
compared  to  the  waste  and  hindrance  set  up  by 
our  absurd  municipal  frontiers.  A  relimitation  of 
the  areas  and  reconstitution  of  the  units  of  local 
government  is  the  most  pressing  requirement  made 
by  municipal  trade  upon  our  constructive  states- 
manship. We  will  no  doubt  ignore  the  existing 
deadlock  as  long  as  we  can  ;  for  we  are  slow  to 
frame  ourselves  to  new  occasions  :  we  still  nail 
telephone  wires  to  chimneys  and  copings  exactly 
as  a  laborer's  wife  stretches  her  clothes  line  in  the 
back  yard  ;  and  the  newest  buildings  so  resolutely 
ignore  the  existence  of  the  bicycle  that  it  is  posi- 
tively easier  to  accommodate  one  in  an  XVIII 
century  house  than  in  a  XX  century  one.  But 
electricity  is  a  potent  force  :  it  will  shock  British 
conservatism  (a  polite  name  for  British  laziness) 
out  of  its  anachronisms  if  anything  can. 


Printed  by  V^.  &  R.  Clark,  Limited,  Edinburgh. 


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4451 — Cofflmon  sonce 
S53o  of  municipal 
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